Dive Brief:

• When a resident leaves his or her apartment, it costs $3,976 to replace them, according to a new report from proptech company Zego, which also found that it takes 17.6 months to recover the cost of losing a tenant.
• The average cost to lose a resident was $3,850 in 2021, according to Zego. It took property managers approximately 19 months to recoup this income.
• As rents rise, more residents are shopping for new apartments. Eighty-two percent of renters plan to move in the next year, according to Zumper’s Annual Rent Report. In addition, in a survey of 30,000 renters, Apartments.com found that 60% say they want to move when their lease expires. 

Dive Insight:

As rents have risen, the time for managers to recover the cost of losing a resident fell 1.4 months from 2021 to 2022. Zego says that operators may cycle through two or three more residents before a manager recovers turnover costs.

“Even though there’s a slight improvement in recovery time, one thing remains clear. The cost of losing a single resident is staggering,” according to Zego’s report. “And, the financial impact lingers well beyond the point your resident leaves.”

Average turnover costs include:

• Lost rents: $1,598
• Concessions: $1,240
• Unit repair costs: $775
• Marketing and advertising: $364

Rapidly rising labor fees are wrapped in those unit repair prices. If the residents stay longer, maintenance isn’t needed to turn the unit.

“It might become even more prevalent where people want renewals because labor is so tight,” said Andy Newell, CFO for Monarch Investment and Management Group, the No. 20 manager in the country. “The more we lean on maintenance people, the more there is a premium on just renewing the lease.”

Minimizing these preventable costs still remains the top reason to focus on resident retention, according to the report. Many companies already realize this. 

“It’s important to keep our customers in place,” said Samantha McQuown, vice president of business operations for King of Prussia, Pennsylvania-based Morgan Properties, the No. 3 largest owner of apartments in the country.

But owners still see an opportunity to capture more rent per unit when residents stay. 

“We're seeing retention and we're seeing strong occupancy ” said George Goyal, founding partner at Houston-based Three Pillars Capital Group. “In fact, our rents are under market. We're about to adjust our rents upward by 5% to 6% on all of our properties because continued demand is still there.”

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