Incentive for tenants to tell you when they will move?

Question

Goooood evening BP!

I have something that has been on my mind for a little while. I have a friend who works for a REIT and he was explaining to me at a meetup one night about how his company is only allowed a maximum of 5 days of vacancy at any given time, and this absolutely rocked my world.

Without getting into the weeds too much, essentially you incentivize tenants to tell you months and months in advance when they are going to leave & you go into the unit and make a scope of work for what needs to be done to do the turnover. All of the materials are ordered & contractors are lined up a few months before the tenancy will end, and the day the tenant leaves, the crews come in and complete all of that work in days. Months before that, the unit is marketed and vetted tenants are essentially put on a waitlist for the unit so everything (in a perfect world) lines up very smoothly and the vacancy is ridiculously low.

I am trying to figure out how to implement this system in the residential/small commercial MF world, I was thinking of writing into the lease something along the lines of “If you give me notice at least 3 months in advance of when you are going to leave & allow me to do an inspection solely for the purpose of making a SOW for the next tenant, the day you leave, I will write you a check for $200” or something like that to be able to implement this system.

I am super curious if anyone has tried anything like this and I am all ears! Thank you!Kyle

Chris Seveney · Answer

@Kyle Curtin

Large companies send out lease Renewal letters 60-90 days in advance and if not signed will market the property. This is not uncommon but five days must be a target as no company will have 99% occupancy / if they do they are not charging enough in rent

Austin F. · Answer

My student rentals have 7 days of vacancy per year, often less. I send out renewals in January with a due date of February for a May year long lease.If the tenant isn't renewing showings if needed will occur while the current tenant is in the unit (to approved applicants only).Lease gets signed, current tenant out on Sunday, then my team has 7 days to get the unit rent ready. On Monday the new tenant is in. Often I can get the units rent ready in a day or two, then offer early move in, which students love. Obviously this won't work for all situations, but it works in my market. The big bonus for me is I can have one week blocked off in my teams schedule months in advance. Additionally all my listing, leasing, and security deposit returns occur roughly at the same time, so most of my office work is concentrated into a few weeks a year.

Adam Martin · Answer

A large company is going to have systems in place and most likely their own team of contractors.  To me the idea of 0 vacancy sounds like a nightmare waiting to happen and you see posts pop up all the time asking what to do if the current tenant needs extra days.  I prefer to wait to show until it is vacant but do feel the same as you that I want as much advance notice as possible and do a walkthrough before they leave so I can plan.  Kentucky  is very landlord friendly so my leases start for a year and then go MTM.  I wrote in that the tenant needs to give 60 days notice and I need to give 30 which gives me plenty of time to plan.  Since it is very common tenants don’t leave on time I also have listed the holdover per day cost.  Vacancy is a cash flow killer for sure but stress killing my love for the business is much more dangerous in my current stage as a small landlord that does most things myself.

Theresa Harris · Answer

My PM sends out renewal notices 60 days in advance. In theory that means they know and can do what you suggested.  Reality doesn't quite work that way as they don't go in and inspect until after tenants are out and don't have enough people to get to all of the units ASAP and then don't have people lined up to do repairs or move in, so most have a 1 month vacancy.  If you are doing it yourself, then yes it can be done and I've done it.  A few tenants are really good and leave the place clean, so they can get their deposit back.  Others, you need to do a bit of cleaning and removal of trash.  Both of those you can do in half a day if you are prepared to go in and do it quickly.

Lorenzo Prieto · Answer

Kyle, this is a great idea! I'm certainly going to be implementing some type of incentive for my tenants to let me know way in advance if they will not be renewing a lease. Very proactive way of going about it!

Kyle Curtin · Answer

Hi Lorenzo! Thank you so much! When I first heard about this concept it really blew my mind. The residential application is definitely something to toy with and fine tune, but even if the majority of vacancy becomes a thing of the past, I think it can be very interesting!

Kyle Curtin · Answer

Hi Chris! That is very interesting!!! That is a very good point as well, I’m not sure if that is a target or how it works on a more tactical level. Sending out the lease renewals a couple months in advance sounds like it can be a game changer if implemented correctly! Thank you! :)

Incentive for tenants to tell you when they will move?

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