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Author: Mark Ainely | Partner GC Realty & Development & Co-Host Straight Up Chicago Investor Podcast
For years, you’ve heard us saying that retaining good tenants will maximize your return on investment property. Maybe you didn’t believe us when we said that turning over a rental home when a tenant moves out significantly eats into your ROI. Rather than just saying “trust us,” we’ve brought our data to back up our recommendation.
Windy City Turnover Experts
Since 2022, GC Realty & Development, LLC has handled nearly 1,100 turnovers throughout Chicagoland for our rental property owners. So, we have a good sample size of what it takes to prepare a rental for the next tenants.
Sit down, the numbers may shock you.
Altogether, GC Realty & Development, LLC performed roughly $3.78 million in renovations and preparations for new tenants. The average cost for property owners throughout Chicago? About $3,600.
As you can imagine, certain parts of town are more expensive to maintain than others. Some of that cost is driven by the average age and condition of homes in a neighborhood. Factors like average wear and tear they receive also come into play. Some of these homes required major projects that totaled more than $12,000!
Plus, the demand for different amenity upgrades varies from neighborhood to neighborhood. Knowing your target market is key to getting it right.
For example, adults and tenants with children have higher expectations for nicer amenities that require more thoughtful upgrades. However, making these updates adds to the overall long-term value of an investment property while supporting higher rent rates for the area.
Meanwhile, areas that cater to university student tenants are more budget-friendly for owners who can plan for moderate upgrades and maintenance. In the long run, these turnovers are more affordable and efficient for cost-conscious owners, making them strong value markets.
What the Data Tells Us
We’ve also identified trends that prove consistency in getting those turnovers performed in a timely fashion, which benefits our clients and boosts our reputation as a responsive property management company.
For example, based on the zip code, we can predict roughly how much an owner may need to plan for in turnover costs. However, we can complete turnover activities in roughly the same period regardless of strong value markets with cheaper and faster turnovers and costlier and slower areas that require larger-scale projects and high-value investments.
When we looked at the numbers, we saw a large jump in turnovers after a strong expansion in earlier years. During that time, turnovers reached new highs, demonstrating the scale of demand for property management services. Since then, the turnover rate has dropped while average client cost levels have remained constant.
Factoring in Onboarding Costs
Another important factor is that onboarding new clients (especially those new to owning rentals) will result in higher turnover totals. This is a normal part of the process as property owners learn what needs to happen to keep their tenants happy and their units filled. As we onboard new owners, projects typically fall into one of three buckets: required, recommended, and deferred projects.
Required Projects
When onboarding a new client, we work with them to itemize what needs to happen immediately for compliance and market a property (aka needs repair vs. adds value).
For example, transitioning a primary residence into a rental property often comes with additional costs to comply with codes and standards. These are non-negotiables that primarily focus on maintaining functional, safe, and healthy living conditions. They are the price of doing business as a rental property owner in Chicago.
To help our clients better understand this benchmark, we created the GC Property Standards™. They break down into three key pillars: functional, safety, and clean:
Functional: Everything in the unit is installed properly and works correctly.
Safety: Prevents or addresses any safety issues, including adding or removing something to prevent a future issue
Clean: “Hotel room clean” using the correct cleaning products on everything, including switch plate and outlet covers, door frames, exterior doors, return vent grills, and ceiling fan blades
Examples: Properly secured handrails on steps and working locks on all gates, windows, and doors
Recommended Projects
Other costs come from updates to get a property “rent-ready” to appeal to the most highly qualified tenants. While not required, we highly recommend these projects to keep a rental competitive in its market area and add value to an investment.
Examples: Finishing or partially finishing basements, replacing carpet with vinyl plank flooring, or installing stainless steel appliances in the kitchen
Deferred Projects
We also create a list of deferred maintenance and updates for the next few years. Some simply cannot be completed without immense inconvenience to tenants living in the unit. So we agree to wait until turnover to complete projects like replacing entire bathrooms or kitchens, or aging HVAC systems.
Examples: Major overhauls of bathrooms or kitchens, and replacing building boiler systems
With Scale Comes Efficiency
After completing over a thousand turnover projects in three years, you get into a rhythm and develop muscle memory.
As GC Realty & Development, LLC expanded and scaled our operations over the last few years, we’ve become increasingly efficient at performing turnovers to get new tenants placed quickly. Down to the neighborhood, we know what amenities tenants look for in rental units and can advise our clients.
That means we can anticipate what a property needs to become rent-ready and have the hands on deck to complete those projects quickly. We keep only the best contractors we trust on speed dial to help us complete turnover activities.
This helps us balance speed and quality, minimizing the vacancy period. As we’ve said over and over, a vacant rental isn’t doing its job to make the owner money. It directly impacts profitability, cash flow, and the overall financial health of the investment.
This way, when a property experiences turnover, we can go in already knowing the basic updates necessary (fresh paint and steamed or new carpets are big ones). But we can also prepare for those additional non-urgent deferred projects to minimize the disruption to current tenants and shorten overall vacancy periods.
The Importance of Being Prepared for Turnovers
We cannot stress enough that every day a unit sits empty, it costs the owner money. The unit doesn’t bring in rent money without tenants, but mortgages, taxes, and insurance are still due. Maintenance projects still need to be completed.
In addition, the longer a unit sits empty, the more it starts to lose its luster with prospective candidates. Unless it’s getting a major overhaul (think gutted to the studs), seeing an empty unit makes people wonder if there’s something wrong with it.
Plus, vacant properties sitting untouched because of unprepared landlords invite questionable characters to help themselves to the vacant space. Especially in Chicago, we’re seeing rental properties facing a serious squatter epidemic. Daily activity at a property cuts down on the opportunities for a squatter to get a foothold in a rental home.
How much are vacant units impacting your bottom line?
The Best Turnover Cost is No Turnover Costs
Of course, this comes back to what we’ve been saying: getting highly qualified tenants into a rental property and keeping them happy minimizes costs beyond basic maintenance and repairs.
Ultimately, you want to keep happy tenants who consistently pay the rent on time in your rental properties. That starts with proper screening, which accepts only the best candidates for a rental unit. Once you get tenants in, you can’t just go on autopilot and collect the rent checks. You have to be responsive to tenant questions and requests.
But tenant screening is the first line of defence in safeguarding your investment. GC Realty & Development, LLC proudly experienced zero evictions in 2024, a statistic we credit to our amazing tenant screening process. In 2023, we processed nearly 2,200 applications for 324 units.
Conducting Turnovers as a Self-Managing Landlord
If you own rental property and plan to do all turnover activities yourself, here are a few reminders about turnovers and costs
First and foremost, understand that even the best tenants will eventually need or want to move out. Being prepared with a task list (and the cash reserves to complete it) is vital to minimizing downtime during tenant turnover. Conducting periodic inspections can also minimize surprises for any additional damage or replacements before new tenants move in.
What does your target market want in a rental home? What neighborhoods are the most desirable? What amenities and benefits would they want from a property? What do comparative rental homes look like (and what rent rate do they charge)? Rather than overspending on upgrades, do your research and plan for the right level of materials and updates.
Some projects require the proper permits and approvals to complete. Government offices are notoriously slow and reject permit applications for all kinds of crazy reasons. Organizing any paperwork and working through these inevitable hurdles before you’re in crunch time will reduce your stress levels. Plus, getting approvals for plans ahead of time means you’ll be ready to go right away once a property becomes vacant.
Just as importantly, have your list of trusted vendors available to do work. Some projects require a licensed professional, which you cannot legally do yourself. Having those vendors you trust lined up saves you tons of time and money, as well as dealing with less-than-reputable people and their mistakes.
You don’t want to have to go through all this again next year if you can help it. By having a legal, selective screening process, you can identify the red flags of tenants who might become problems. Your process should include a comprehensive application form, ID verification, credit checks, criminal background checks, rental history verification, and income verification.
Contact Your Trusted Property Management Company
Turnovers can create a lot of stress for landlords. If you own rental property, you don’t have to do things alone. The property managers at GC Realty & Development, LLC are available to help you minimize the downtime of your rental between tenants.
Our process for conducting turnover work and using our own contracted vendors shortens the vacancy time for your rental. We also reduce your overall costs to prepare it for the next tenant. Our versatile team can support smaller, cost-effective turnover projects or larger, more complex ones.
Contact our team today to learn more.
Capitalize On Your Team
We’ve shared a lot of information here on investing in real estate locally in Chicagoland. If you live outside the area, it may seem overwhelming for those wanting to invest in the Chicago market. But we really just look at it as a team sport.
Who’s on your investing team? Do you even have a team? GC Realty & Development, LLC has a dedicated team of professionals willing to share decades of experience in all facets of real estate investment. We handle everything from brokerage, leasing, and property management. Whether you hire us or not, we’re happy to provide our resources and expertise.
What gets me up in the morning and keeps me going 12 hours a day is the ability to add value to local area investors in Chicago and beyond! Those who connect with me often hear me say that our goal is to bring value to everyone we come in contact with.
We hope that in return, they will one day hire us for our tenant placement or property management services, refer us to someone they know, or leave a review about our services. We would clearly love all three; however, we’re happy whenever we get the opportunity to help!
Reach out today!
Partner / Co-Host of Straight Up Chicago Investor Podcast
