Tenant turnover matters. - earnest

Tenant turnover matters.

Tenant Turnover Matters

Growing rental yields are a benefit to most landlords as in theory this increases the investment returns. However having a single minded approach to letting can be counterproductive. Our experience shows that keeping happy tenants in place can be more lucrative than increased gross yields. Tenant turnover does matter.

The reason is pretty obvious but from experience we can assure you that it is often overlooked by landlords. Tenants moving bring many costs such as light refurbishments, furnishings, repairs, loss of rent, agent’s fees etc. These costs could amount to a month’s rent or more in many cases which makes a real dent in the income level of that property. Often the main reason for a tenant moving on is because of a rent increase.

The average tenancy going by our experience is about 2.5 years in Dublin, which is very low in comparison to other European countries. The main reason is most likely because Irish tenants had very little protection until recently. This tends to lead to more private ownership as it is the only real option for long term security.

If you look at Germany, the typical tenancy duration is about 12 years. Like most of Europe, Germany’s leases are very long, favourable to tenants and the rents are linked to inflation.

The research (Aberdeen Standard Investments) shows that if all other factors such as facilities, adequate maintenance etc. are equal, investments in low-turnover markets will generate much better net income than in high-turnover markets, such as the Dublin.

Although landlords may not thank the government for introducing rent restrictions etc, there is a good chance that they will impact positively on their investments in the long run.

So rather than always maximising gross rents, tenant satisfaction should be included in the calculation.

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