I used to think tenant longevity was a good thing, but I realized that for all the Pros (i.e. not having turn over costs, not having to hustle to find a tenant, eating utilities), there are many Cons with keeping tenants more than 5 years.

1) Rent rates tend to lag behind the market. This is particularly true if not in a volatile market. LLs in volatile markets that I have talked to tend to be on top of their game or they risk losing a LOT of money. But for most markets like mine that are low-cost and change maybe 1-3% each year, it's a lot of hassle to send a letter, negotiate, follow up, etc if it's only going to be $15 - $30 / month. I think this is why many land lords let 1, 2, 3 years go by with no increase. "It's not that much and I'm too busy"....becomes the operating norm. Next thing you know a 10 years tenant is at HALF of market rent! I have bought these kinds of houses that should rent for $600 and current tenant is paying $325.

2) Almost all "damages" gradually become normal wear and tear. At least in the tenant's mind, if not the judge's mind. Let's face it: maybe only 1 time in 1000 will you ever end up in front of a judge arguing this point, but bottom line is I think many LLs too figure that after 10+ years we should expect lifeless carpets and scratched, dinged and smudges walls. But if the person is a 1-2 year tenant? Nope, that's DAMAGE and it gets billed against the deposit vs. coming directly out of my pocket.

3) Few opportunities to do difficult repairs/upgrades. We all know how challenging it can be to work around a tenant's schedule, and nothing spells inconvenient like tearing out flooring or doing electric and plumbing work when someone is living in the unit. I have compared the last 5 flooring jobs I did that were similar in scope and found that on average it took longer and cost about 30% MORE to do the job when someone was living there vs. a vacant unit. Those costs add up!

4) Entitlement. Sometimes even good tenants feel like we "owed them" something when they've been around awhile. Call it seniority, customer loyalty (yes, I had a tenant use that phrase with me once!), etc. They figure it's "their house", so they start doing little things like getting a 50 gallon fish tank without approval or letting their friends/family crash (for a few months) etc. Maybe just breaking a few rules here and there since you usually never catch them. "Familiarity breeds contempt" is the old saying. Whereas well-screen, fresh tenants tend to stay more on their toes.

5) Missing out on FEE income. Fees are usually one-time income items, and they only get collected at move-in. I charge $150 per animal up front and $20 per month (going up to $25 in 2021). So if you amortize that fee over a 1 year tenancy, you make $12.50 per month extra. But if you amortize it over 5 years, it's only $2.50 per month extra. By rotating out every 2-3 years, you can collect 3-4 times as much in pet fees. This is also true for those who charge move-in fees and application fees that include a profit margin.

6) Getting tenants up to date on lease provisions and policies. Some of us have leases older than our children. Tenant from 10-15 years ago still operates under the outdated versions of my lease, unless I was diligent and sent them an addendum every year. Confession: I wasn't diligent. Also, now that I have auto-debit as a REQUIRMENT vs. and OPTION, I still have some folks who insist on doing it the old way of taking a payment to the bank vs me taking their payment at 3 AM on the morning it is due before they have time to spend it elsewhere or to forget that it's the 1st of the month again.

In summary, there are a lot of advantages to turning over on a short to medium time frame. I've noticed my own income improving as I rotate out more frequently. My rents stay up to market, my units stay nicer on less of my dime, and the fees broken out increase profits about 8% annually.

Thank you for sharing your thoughts on this Sid.

I have always thought that it would be better if I had long term tenants. Maybe that is a natural thought process, IDK. After reading your post and post from others like myob I am giving this some thought.

What you are saying makes since but, as you said, that is if you can turn over in a short to medium time frame. With my lack of experience on that, I am not sure how likely that is and especially given today's applicants from the current situation.

What do you consider a short to medium time frame?

My last tenants I had before the current ones, I didn't up there rent until the last year because I didn't want to fix what wasn't broke. I now regret that and realize my mistake and that I lost money.

Like you, I now have an automatic rent increase in my lease that they agreed to on the front end. In fact, I have a whole new lease and have changed a lot of things. I am going to be changing my lease again soon hopefully. I now have Brads lease that I want to use the next time. I have learned a lot of things from all of you in the last 2 years. A lot of things that I was doing wrong and I am still learning.

Some times I have difficulty figuring out how to actually implement certain things.

I agree with everything you said, Sid.

I've decided we prefer mid-term. 2-3 years max. I can turn a good tenant's place over in 24 hours if they have only been there a few years, we do it all the time. And the rents increase $25-$50 just about every time.

But when our 10-year tenant moved, it took us 3 months to turn it over because of so many deferred upgrades. He didn't destroy the place at all but it was no longer up to our newer standards. We could have shortened that time frame if we had to but not that much. Rent did go up $325 a month though (was shocked to get that, BTW.)

I believe our friend myob has been sharing the virtue of three year rotation of residents for MANY years for some of the very same reasons you site. When I first saw his statements of NOT wanting residents for more than 3 years, I thought he was nuts, After all, I use to aim to keep residents forever and took pride in saying that my average resident stayed with me a minimum of six years.

I have to admit over time, I too have come to see the benefits of not keeping residents that long. Don't get me wrong, "great" long term residents makes landlording a whole lot easier. And you do not have the "risk" factor of rolling the dice with a new resident (even with good screening).

However, I am no longer hesitant to hike my rents each year at a bigger jump than I used to for fear of losing them. If the resident decides to move, it's okay with me since I am able to quickly find new residents at even higher rates, And this year, it has been great news when a resident decides to move because my rent jumps this year have been the most they have ever been.

Yep, Jeffrey, agree absolutely with you too!

It's a reevaluation process of business practices.

Thank you Jeffrey for your input.

Me? I WANT them to stay. A loooonnngggg time. Turnover is an expense of money and MY TIME no matter how it is framed. The national average turnover cost was $3100 a few years ago.

It messes with my FREEDOM!!! and increases my RISK.

The complaint seems to center around keeping up with market rents. No problem, just do yearly rent increases. Don't be shy. No turnover upgrades, paint, flooring, advertising, showing, screening, or risk the new res will turn sour needed.

Find good residents and work to keep them. Those who stay do not need new flooring, or new paint, or new countertops, or or or... We spend LESS maintaining long term residents.

Newer LLs beware: rents do not always rise like we have seen the past few years. Some years rents will go down like 10 years ago. The long term res does not ask for a decrease when the market goes down. They stay at the old, higher rate.

Think big and think long term wealth.

And raise your animal fee. They WILL pay $35. Try me on this!

BRAD

Thanks to everyone who responded: this has been an interesting thread so far, and I hope more will jump on.

I agree with WMH's time frame: 1-2 years is short term. 3-4 years is medium term. 5+ years is long-term.

I do not discount Brad's wisdom, and his business model is different from mine as he does RTO's exclusively (is that still right?). For RTO's, I can definitely see the advantage.

$3,100 for a turn over? Yikes! My average turn over is $500-$600. Something is wrong if it costs $3,100 to turn a unit. My GUESS is that many of the higher end units require a lot more work and sprucing vs. my Class C humble abodes. Yes, if you're renting Class A and have to remodel the kitchen every 10 years to stay trendy, I could see that number being legit. I've borrowed WMH's "ready to occupy" checklist, and that has greatly helped keep our costs down.

I wonder too if the cost of the turnover is including vacancy/lost rent? I can see where in a more pricy market like the North East and Left coasts where rent is $2,000+ per month that those costs would skyrocket.

Or maybe the high cost turnover is deferred maint that has added up over the years. I am turning over every 3 years, so if I take a 10 year tenant then I multiply my costs by 3....Now I'm at $1,800 - $2,000. Seems like a lot, but really it's the same thing. The cost of the turn over is not saved, it is merely deferred.

Time? Yes, we must guard our time and FREEEEEDOM! Amen, amen! With lock box showings, DocuSign leases, etc I would say the average turn takes me.... 1.5-2 hours? Once I can get my move-in process automated, that will drop to less than an hour. An hour every 2-3 years isn't a deal killer for me.

Jeffrey makes a great point that more frequent turnovers makes sense in today's market, but that might not make sense next year. Perhaps I will go back to wanting more long term renters if the picking grow slim. Right now rentals are FLYING off the market: good tenants are not hard to find. I do have to have automated pre-screening processes that weed thru the tire-kickers and the obviously unqualified.

Interesting discussion...let's keep it going.

I want more units! There are lots of good decent people out there with good jobs who can't find affordable (non-luxury) housing. But like them, I can't find any to buy either.

I want them to stay as long as they are cooperative and abiding by the terms of the lease.

My experience is that with a good, properly screened tenant, the cost of a turnover after 10 years is no more in total than you would have spent in total if you had done 3-4 regular turnovers in the meantime.

With rent control, I’m motivated to have people move out every two years. If they stay, I can only increase rent by 2.5%, but if new tenants, in I can increase an additional 4% to 6.25% And if I spend 15% of rents on improvements, I can set my rent to what the market will bear.

Regarding turnover costs, I learned from this site, to do all maintenance while the place is occupied, so at turnover there’s not much to do. That also reduces turnover time to 5 days for my student rentals. I also end the lease on the 20th for maintenance and repairs. I used to prorate the month, but I don’t anymore, and no one seems to mind.

My experience is that short to mid term tenants, properly chosen in the first place, leave nothing much for us to do at turnover BUT give us the OPPORTUNITY to do quick upgrades if we choose to. We often have current tenants leaving before actual end of month and new tenants sometimes delaying occupancy beyond the first for various reasons (work, moving truck schedules, etc.) So when we get those 2-3-5 days of empty, we can get a lot done on a place that is already is excellent condition.

I'm with Razorback and Dave. Keep any tenants following the lease and cooperative, etc. as long as they want and most stay between 3-6 years, the 5-6 years being the norm, if not longer.

A couple years ago I did not renew a lease due to music noise levels and poor care of the unit. So before things got worse, I did not renew.

I would prefer to have tenants stay 5 years, max. After that, they seem to decide that they own the place and they spread out and stop worrying about damage and stop caring whether or not the landlord is happy with them.

The first year, tenants are really worried about their deposit and very careful with the house. Any time I've had tenants move after one year, I don't have to do anything to the rental. There is no dirt and no damage, because they really want that deposit back.

The second year, tenants are still aware of their deposit and a still cautious about how they treat the house.

After that they forget about their deposit until time to move and they start to spread out more and more, feel more ownership rights, and stop being so careful about dirt and damage.

Usually, under four to five years, I can get the house ready with a good deep cleaning. Any longer than that and I am repairing careless damage and dealing with accumulated garbage.

A bit off topic, but I've had tenants buy the house they are living in from me and each time, they really let the place go with no landlord to nag them about weeds or garbage.

I believe what you say Sid, and there lots of lessons to learn from it.

As for me, I see the TRUE cost of a Vacancy. I honestly believe they are my most expensive expense I have. There are cost that are not easily seen but stack up quickly.

So I target for long term residents. I want them there so long that they can buy the place........but I believe in empower and make sure that they will be there for a long time.

With the current interest rates, a resident can pay me $850 or they can pay the bank $600/month. With tools like Clear Now, it is so easy to set the tenant up for success.

OUTSTANDING DISCUSSION!

There are so many profit centers in the business - it really depends on your business model and the tools you utilize to achieve results.

I prefer long-term tenants. I screen carefully and do upgrades while they're paying rent. We've replaced windows, flooring, tub surrounds, and even a basement wall (with the house up on jacks!) without losing a penny of rental income.

I have several 8-10 year tenants, most others are like 3-5 years. They all take good care of the home and inform us of any repair needs promptly. We are updated with repairs including new roof, new HVAC, new fence, even foundation work while they are living there. Rents do go up every year, but I keep them at average $100 below market rent ( our rent range $1400-2000).. So they are happy and we are happy. I rather get slightly less and have great tenants than turn overs. too much work for me.

I personally prefer about a 5 yr turnover. Any longer, too much work to get it turnover.

If you trying long term tenants, you have to have small increases every year. Refer to Brad20k post last week. See how much $$ is lost on the landlord side...