Multifamily
Turnover Is the Line Multifamily Pro Formas Understate
It is not the paint and carpet. It is the days the unit sits empty, the locator fee, and the make-ready labor, every single time.
Most apartment pro formas handle turnover with a maintenance line and a vacancy percentage. That understates it, because turnover costs money in three separate places and only one of them looks like maintenance.
The three costs
Make-ready. Paint, carpet or flooring, cleaning, minor repairs. This is the visible one, and on a typical unit it runs a thousand to three thousand dollars depending on the standard you hold.
Downtime. The days between one tenant leaving and the next paying. Three weeks is normal, longer in soft markets or if the make-ready queue backs up. This is lost revenue and it does not show up in a maintenance budget at all, it hides inside your vacancy assumption, usually undercounted.
Leasing. A locator fee or a leasing bonus, every time, on every unit that turns.
What it adds up to
Take a 65-unit property at 45 percent annual turnover. That is roughly 29 units turning a year, a unit turning every twelve or thirteen days, forever. At a $2,200 make-ready, three weeks of downtime and a $400 leasing fee, the all-in annual cost runs comfortably past $50,000, or around $790 per unit across the whole portfolio.
Now move turnover from 45 percent to 80 and watch what happens to net operating income. On most properties the swing is worth several hundred basis points of cash-on-cash return, larger than the effect of a fifty basis point move in your exit cap rate.
Why this is the good news
Because unlike rent growth, exit cap rates or interest rates, turnover is substantially within your control. Renewal incentives, faster make-ready turnarounds, better screening and simply answering the phone all move it. Cutting turnover ten points is usually worth more than raising rents twenty dollars, and it does not require the market to cooperate.
Model it as its own line rather than burying it in maintenance, and it stops being invisible.
Break it out: Multifamily operations model gives turnover its own section, make-ready, downtime and leasing fees, with every line as a share of income.
Related notes
How to read this. These are working notes. Figures come from public reporting and from the models on this site, and market conditions change, check anything time-sensitive against the source before you rely on it. Nothing here is investment, tax or legal advice, and no note is a substitute for diligence on a specific property.
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