What does "turnover rate" indicate in property management?

Turnover rate is an essential metric in property management that specifically measures the percentage of tenants who leave a rental property over a given period, usually expressed on an annual basis. A high turnover rate can indicate potential issues such as tenant dissatisfaction, high rental rates, or management inefficiencies, while a lower turnover rate typically suggests stable occupancy and possibly higher tenant satisfaction.

Understanding turnover is crucial for property managers as it directly impacts income and expenses. When tenants vacate, property managers often incur costs related to advertising for new tenants, conducting background checks, preparing the unit for new occupants, and potentially experiencing a loss of rental income during vacancy. Thus, managing turnover effectively can lead to better financial performance of the property.

In contrast, the percentage of property maintenance costs and the number of repairs needed do not provide insight into tenant movement, and the average duration of tenant occupancy, while related, does not directly quantify the outflow of tenants. Hence, turnover rate distinctly reflects the dynamics of tenant retention and vacancy management within a rental property.