Think you know the true cost of a rental unit turnover? You may want to check the books. While it's easy to plan for the standard services and predictable expenses, there are many hidden variables and unexpected expenditures that can crop up on the tab.
Make no mistake: when it comes to budgets, unit turnovers can be notoriously hard to predict. That's why it's essential to understand where costs can accrue, how your team may be losing money, and what you can do to avoid "surprises."
Let's start by breaking down the costs associated with any property project:
- Direct costs: These are your run-of-the-mill expenses that aren't easy to overlook. They include all labor, materials, and the vendor expenses required to see a unit turnover through to completion.
- Indirect costs: A unit turnover has many moving parts. That includes administrative tasks in the background that keep all parties scheduled, connected, on task, and paid.
- Opportunity costs: These are the benefits and savings that teams can miss depending on their approach to a unit turnover. For example, sticking to manual processes (e.g., project scheduling, vendor management, inspections, etc.) may mean spending less on property management software and technology. Still, the reduced efficiencies and longer processes could mean units are sitting vacant for longer. Similarly, relying on pen and paper inspections may negate the need for mobile inspections apps, but it exposes the process to costly human errors and communication delays.
Controlling your costs
It pays to recognize how property management teams lose money when it comes to unit turnovers. In a study of over 50,000-unit turnover projects, SuiteSpot Technology found that scheduling gaps, scoping changes, delays, and overall inefficiencies resulted in the lion's share of indirect or missed opportunity costs. Moreover, the study found that a typical portfolio of 10,000 units loses $2 to $3 million of NOI from inefficient turnovers annually, which translates into $40 to $60 million of potentially unrealized asset value.
There are many reasons why costly inefficiencies crop up during a unit turnover. However, a common factor is a reliance on manual processes that are prone to costly delays, errors, or communication gaps. By comparison, the same SuiteSpot study found that property managers who have adopted technologies to manage turnover processes experience fewer disruptions, changes, and team coordination challenges.
For example, property managers that use technology to manage the turnover process see the following results, as outlined in the SuiteSpot study:
- 50% fewer occurrences of purchase orders not being approved before the move-out date
- 40% lower rate of change orders occurring after the move-out date
- 4+ hours of time savings per turnover for field staff
- Up to 60% reduction in overall turnover time
The costs of unit turnover can add up. That's why gaining clarity around where your budget is being spent and – more importantly – where opportunities for savings exist, is key to avoiding surprises and controlling your bottom line.