Tenant turnover and rental income from a flat: Key aspects

The risk of non-paying tenants and its impact on returns

The greatest concern for investors is tenants who are unable to pay their rent regularly. These situations can place a considerable burden on an investor, particularly if they rely on regular rental income. Many investors are repaying a mortgage or have other financial commitments. Long-term failures by tenants to make payments can ultimately even force an owner to sell their property on less favourable terms than they had envisaged. This will negatively affect the overall return on the investment.

Frequent tenant turnover

If tenants change frequently in a flat, this can present property owners with several challenges and complications. Above all, there is a risk of financial losses caused by vacancies while a new tenant is being sought. The time and energy invested in advertising and viewings, as well as the administration involved in selecting new tenants, can be highly demanding. In addition, frequent tenant changes can mean higher maintenance costs – redecorating, cleaning and repairs after tenants. It is therefore beneficial for owners to maintain good relationships with their current tenants and try to encourage them to stay longer. How much tenant turnover is still normal, and when should you start addressing it differently? 

Calculating tenant turnover

Tenant turnover can have a significant impact on returns from an investment flat. Higher turnover can mean not only lost rental income, but also additional costs associated with finding new tenants. Turnover is calculated as the ratio between the number of tenants who left the property and the total number of tenants during a given period. The result is turnover expressed as a percentage. For example, if you owned a tenement building and 10 out of 50 tenants left in one year, turnover would be (10/50) * 100 = 20%. High turnover may signal potential problems, such as poor-quality housing or inadequate property management, whereas low turnover generally indicates tenant satisfaction and stability.

Reasons for high turnover

It is worth assessing why tenants are leaving. For example, it is natural for students or young couples to move more frequently – to a different location or to a larger home. However, it may be that you have set the rent too high and tenants are unable to afford it in the long term. In that case, ask yourself whether it is worthwhile. Financially, you may end up in the same position overall if the rent were lower, tenants stayed longer and you did not experience gaps in rental income. Another possibility is that there is something wrong with the flat. It may have unsuitable or broken fittings, mould problems or troublesome neighbours. Take a genuine interest in their reasons; not everyone will openly tell you where the problem lies without being asked.

The concerns associated with property investment

It would be wonderful if property investment meant nothing but completely hassle-free passive income. In reality, acquiring a property brings new concerns. Owners must look after their properties, including management, maintenance, communication with tenants and other administrative duties. If they want the best possible results, it is almost a full-time job. But who says you have to do it all yourself?

Guaranteed rent: a solution for minimising risk

Bohemian Estates’ guaranteed rent service gives investors the option of leaving the concerns associated with letting to professionals. The service includes thorough tenant checks against debtor registers and guarantees regular rental income. This allows investors to achieve more stable returns and reduce the stress associated with letting property.

Conclusion

Property investment can provide a stable source of income, but it also brings a number of challenges that can significantly affect overall returns. The main concerns are rental income shortfalls caused by non-paying tenants and frequent tenant turnover. To minimise the risks associated with letting, you can use services such as Bohemian Estates’ Guaranteed Rent, which passes these concerns on to professionals and provides the certainty of regular income.