2024 with Drexel Properties
President and Founder of Drexel Properties, Jeff Weinberg, shares industry insights and what sets Drexel apart.
If you’re managing more than 10 units, it’s time to change how you think about leasing. Every time you allow a unit to become vacant for one month between tenants, you lose 8.3% of that unit’s potential revenue. The good news is that if you have a 10-unit property and a unit sits vacant for a month, it’s really only a 0.83% loss of revenue. However, if you turnover 4 apartments on average, letting these units sit vacant results in a 3.3% revenue loss. In real dollars, if the average rent is $1,200, you have a $4,800 loss of annual revenue. If you are looking to sell or refinance, the impact is significant. At a 6% cap rate, $4,800 of additional NOI amounts to $80,000 of value. The bottom line is that you want to avoid letting your apartment sit vacant. This means you need to know when a current tenant is moving out. You do not want to learn this just a few days before they leave. Leasing begins with renewals! Send out renewal notices early (remember in Chicago, you need to do this 120 in advance for any tenant living in their home for 3+ years). Follow up with them to sign their renewal or confirm they plan not to renew. It’s completely reasonable to expect tenants to commit to their renewal at least 30 days ahead of lease expiration. In fact, 60 days ahead is reasonable as well. Knowing a unit is coming available sets you up to get it leased. Knowing a unit is leased allows you to plan for the turnover between tenants. Knowing ahead of time when you need to prepare and clean an apartment allows you to plan and schedule resources to get the job done quickly. . You may ask, how do you manage turnover when you have tenants moving in and out on the same day, or a day apart? The answer will surprise you. Drexel Properties has been doing this for 21 years and we have learned that overwhelmingly, people are reasonable and flexible. It appears that 80% of the time one of the parties has flexibility - either the tenant moving out can do so a few days early or the one moving in has the ability to move in after the 1st. It turns out that only once in a while you need to deal with what I refer to as the “clown car move” - the move-out and move-in happen the same day. Keep in mind that leases end on the last day of the month and begin on the 1st. This means that people are homeless overnight. Of course in the real world, it doesn’t work that way. The bottom line is, having the lead time, planning ahead, and communicating often will make the transition between tenants go smoothly. If you are on the north side of Chicago and looking for better property management solutions, please contact Drexel Properties for a consultation.
