Same-day Turnover: Savings? Or Foolish Disaster?

Question

In the upcoming scenario, 3 of the 4 units in a 4plex will all be vacated and re-occupied in literally a 10min-2 hour period. 2 of these units will be vacated and re-occupied by people already living at the building, who are switching units, with some flexibility because I am accommodating their desired unit (and one is my handyman, so more flexibility there). The third is a new tenant. This will save me about $2,500 in lost rents on two, one-month unit turns that I expected (which was part of my goal for performance this year).

I realize that if one tenant does not leave as expected, the first tenant won't be able to move in the first unit. The second tenant won't be able to move in to the second unit, and the new tenant won't be able to move in to the third unit. He says he has it all figured it out and will be moved a day early, but you never know.. So am I crazy to try to do this? Or does saving the $2,500, keeping an existing tenant at the building for another year, and accomodating my handyman make good business sense?

I think I'm a little lucky on this multi-turn, given my handyman has the unit for the new tenant, so worse comes to worse, I could use one of my free night certificates for a hotel to put him and his roommate up, and buy them a nice dinner, and still be way ahead on the $2,500 without doing my "Zero Vacancy" operation. Tips? Advice? Criticism? Does anyone else do this? @Andrew Fingado , would be interested to hear what you have to say..

Steve Babiak · Answer

J. Martin - maybe you should have staggered the lease terms so that they all don't renew on the same day again :) Seriously, you could have had one on 12 month lease, another on 13 months, and another on 14 months (with all of them renewing in the future for just 12 months) - the result being only one vacancy at a time moving forward.

Bill S. · Answer

I do this all the time. Not necessarily the switcharo (3 units cascading) that you are doing but new in on the heals of the old leaving. A couple of tricks I use. I ask if the new would be willing to pay the perday rate if they get to move in early. Most say yes. I offer the old, if they leave early I will refund the perday rate. Most also take me up on this. This gives me a day or so to clean and fix if needed at only the per day cost. It's also clear (in writing) that leaving tenanat must be out by end of business (5pm) on the move-out day. I tell new tenants that place may not be ready until noon on their first day. This gives me 18 hours or so to get my cleaning person in if the departing tenants don't clean. I do a pre inspection and fix everything I can prior to move-out. Move-out instructions for old tenants, include directions that if their current place is "not ready" they are expected to rent a truck and storage unit, move their stuff, and stay in a hotel. This is clearly spelled out in the move out instructions. I know some that put this language in their lease. This is not without peril. If the "leaving" tenant doens't leave and you signed a lease with the new tenant they can sue you for damages. I consider that when putting together these deals and try and get people who will do what they say (myself included).

Andrew Fingado · Answer

J. Martin I have tenancies which begin and end on days other than the 1st. Normally early in the month. I used to do the whole shuffle where i'd have someone incoming and outgoing in the same day, but it got to be too much of a hassle. Someone always took too long to leave, another didn't clean well enough (or at all), or we found a repair issue that was undetectable prior to their stuff being removed. The list goes on, so I decided to play it safe and allow 3-4 days between. That way I have some time to set up appointments with my cleaning crew, handymen/contractors, etc. if necessary. I've never had a problem getting a good tenant pool doing it this way. Although it is a common trend that leases start around the 1st of the month, do a quick craigslist search and there are quite a few that are on other days (ranging from early to middle of the month). Most incoming tenants are able to get their prior rent prorated to the day if they have to. I suppose in some cases it might reduce the applicant pool, in other cases, no. Depends on the market. Glad everything went smoothly with the turnovers! Enjoy that extra cash you saved.

Andrew Fingado · Answer

J. Martin Thanks for the compliments. I guess I am just always looking for pitfalls ahead in my business. You have to. It's better to be safe than sorry. You could always try leaving three days in between time for the next vacant unit you have and compare it to another vacant unit in which you do a quick turnaround. Compare the differences in how many calls you get, any other issues you see, etc. Better yet, here's another idea. Say you allow a few days between turnovers on your next vacant unit, so your new tenant now moves in on the 3rd of the month. Make his lease end sometime around the last week of the month (but not the last day). Like the 27th or something unless its February. That way, you can start advertising the unit as a 1st of the month start date again which may open up more applicants for your area. In addition, it leaves you some breathing room just in case disaster strikes. Then make the next tenant's contract just a bit less than a year also, and so on. Start doing that for all your tenants and wa-la! You have a system which minimizes risk while also allowing for the maximum applicant pool. I would also put in the lease that the tenant is to prorate the last month of his lease to the day if he or you decides to not renew, just to be sure there is no confusion come last month. I have kicked around this idea myself for a while, but never gotten around to it because I always get a lot of applicants interested in the units I manage regardless of when the lease start date is (most of my units I manage are in high demand areas). I think I am going to implement this in a couple of my upcoming leases and see how it goes. Might be something worth testing out on a unit or two yourself. We can compare notes.

Andrew Fingado · Answer

J. Martin Congrats, sounds like it all worked out. I'm just curious what made you think you would have a one month vacancy? Did you send out a renewal package or touch base with the tenants a few months back to see what their plans were? Usually you can minimize the turnover time by requiring tenants to give you 30 or 60 days notice of their plans to leave and then start showing it early while the tenant is still there. You might already know this, but I am just throwing it out there.

Andrew Fingado · Answer

J. Martin Good question. I have been to few seminars on how to obtain zero vacancies. Personally, I would rather have at least a few days in between but I have known many landlords who have done the less than 24 hour turnover shuffle with success. My personal opinion is not without reason. In the past I have had tenants often say they would clean up their unit and make it look as good as new, and all their stuff will be out by "so and so" time. Or, I do a walk through a couple weeks before hand and then upon move out I realize there is a major repair needed (meaning incoming tenant may not be able to settle in right away). So now the new tenant is expected to arrive in 4 hours and the place is not ready. Some incoming tenants are understandable, but others take this as an inexcusable error and then the tone is set between management and tenant from there on out. Not a good first impression. However it sounds like you are already familiar with two of the three incoming tenants because they already live there, they are just switching units. I'd be most worried about the incoming one, since you may not have developed a good rapport yet. However, there is no right or wrong answer. Everyone does it differently. I always err on the side of caution even if it means losing a few bucks. However, I also think if you get along with the current tenants doing the switch, it does make good business sense and probably worth the risk. Having a handyman on-site is a great asset, one in which you will surely find out the hard way if he ended up moving out. I think you are doing the right thing for the circumstances. Go for it!

J. Martin · Answer

Thanks for the suggestions @Andrew Fingado and @Steve Babiak . Steve, in this case, a tenant was leaving at the end of their lease, and a new tenant was going to move in the next day. But one other tenant's lease was coming up in a few months and wanted to renew a year in a smaller apt (family member was moving). Then my handyman wanted to move.. I actually think there is some efficiency to leasing multiple units at once. I don't mind. But I should have the new tenants wait until after the 1st in the future, I think. This situation was a bit unique. Andrew, I think I will just tell new tenants move-in is the 3rd and pro-rate the rent in the future, then see how that goes - or negotiate from there. I appreciate the idea about having the leases end before the end of the month. But not sure how well that would work.. While they technically need to be gone that day, from a more practical/realistic perspective, if they are moving into their new place on a more typical date like the last day or first day of the month, they may just end up staying for the remainder of the month anyway.. I think I like your idea to just start the new tenants a few days later, if that doesn't hurt my tenant pool.. Thanks!

Mark Russo · Answer

It sounds like everything worked out with the move-ins? In my experience, as long as you communicate very clearly with the incoming tenants that it is a very narrow time-frame for the turn-over and that there is the possibility of a potential delay (and offer a few free days of rent if there are any delays!!), it usually works out OK. We try to always set very clear expectations with out tenants.

J. Martin · Answer

Thanks Bill Gulley for bringing up my favorite military phrase - SNAFU! And thank you @Bill S. for the practical advice, having done it before. I think I will just have to be so blatant next time in writing, that it is a possibility.. Again, the issue would come with someone who needs to be out of their place by the 1st.. Do you do this regularly then? (At least with 1 unit at a time, rather than the unusual "cascade" in this circumstance?) I did offer the leaving tenant about 1.5X the daily pro-rata rate for the last couple days of the month to give some motivation, but it looks like it will be tight..

Bill Gulley · Answer

Sounds like the standard SNAFU arrangement, just play it by ear. Biggest shuffle I saw was in on a floor of public housing, what you have is nothing compared to that I'm sure. Quality of tenants and their motivation is key in getting everyone working together. If you have issues with leases terminating and starting, not sure what that was, but use odd days rents and make a new lease. Good luck....LOL :)