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How to Maximize Your Rental Property ROI

Article by NuView Trust Company

Successful Rental Property ROI Starts with a Plan

You can consistently increase your rental property ROI – if you have a good strategy. The key is to include a plan for keeping your tenants long-term. This aspect, while often overlooked, is directly correlated to your rental property ROI success.

The Hidden Costs of Tenant Turnover

The biggest success factor for your rental property ROI is the length of your tenant stay. For example, say you have a property that is rented at $1,150 per month. When the tenant moves out, you’ll have several expenses. On average these will look like:

· 45 days of lost rent = $1,701

· Average turnover repairs = $2,000

When you bought the rental property, you expected a loss of about 12% in maintenance and vacancy costs. However, if you have a tenant turnover every year, that’s a loss in maintenance and vacancy costs of $3,701 a year. Over four years, you’re set up to lose nearly $15,000. That’s a whopping 27% of your rental income!

All in all, how much you lose in rent and turnover repairs will determine the success of your investment. Property managers must pay attention to this basic fact. If your property manager doesn’t strive to keep and re-sign tenants, you’re setting your investment up for failure.

The Advantages of Long-Term Tenants

In contrast, if your tenant stays four years, your returns look much more optimistic. The turnover maintenance and vacancy costs are only $3,701 every four years, decreasing your loss to 6.5%. That’s much brighter than a 27% loss!

Unfortunately, there’s no way to avoid some degree of expenses each time a tenant moves out. By spreading that cost out over four years, however, your rental property ROI will look much better.

Three Keys to Decrease Tenant Turnover

We’ve found three ways to decrease tenant turnover:

Key 1: Sign leases with two and three year terms. When prospective tenants call, we explain that we specialize in long-term leases. This expectation is clear up front; this way we’re able to structure the lease terms to benefit everyone involved. Moving is expensive for tenants too, so we find incentives to encourage longer leases.

Key 2: Invest in properties that are new construction or fully renovated. Brand new and fully renovated properties don’t have as many repairs, and some items are still under warranty. This makes everyone happier.

Key 3: Treat the lease renewal process like a sales opportunity. While often overlooked by property managers, this is the biggest opportunity to secure your returns. We start working to renew leases as soon as tenants move in.

Article by NuView Trust Company

You can meet the NuView Trust Company team by visiting booth #22 at the 2020 Michigan Landlord & Real Estate Investor Conference & Expo! You can visit their website at to learn more.


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