Successful Unit Turns

Welcome to Canada's Property Management Podcast, your number one resource for investing, managing, and maximizing the value of your real estate assets. And now, here's your hosts, Carla Browne and Adrian Schultz, Canada's rental property experts.

Adrian Schulz (00:18):

In today's episode, we're going to talk about successful unit turns. And Carla and I decided that I would share some of my pain points or sob stories about unit turns, and she would then respond with solutions and make all of us feel better. Is that right, Carla?

Carla Browne (00:37):

Yeah, I'm definitely going to do that for you today.

Adrian Schulz (00:41):

So if you are a real estate investor and you have ever experienced either taking on a vacant property, or of course having a property where there's a change in tenants where a tenant has given notice, the first reaction when you get advised that the tenant isn't renewing is sometimes a slight bit of concern because you're not sure who's going to pay the rent when that person leaves. And of course, that's very much related to a successful unit turn. Carla, I have experienced overnight unit turns in my investment properties, and I have also experienced six-week unit turns because of holidays and lack of contractors available, likely poor planning, et cetera. How does a real property management office assure a systematic and successful approach to doing a unit turn?

Carla Browne (01:41):

Well, first of all, you said it. There has to be a system. So you have to have a process. Ours is very... As you know, I love electronic anything, the technology and a lot of automation, making sure that all of this communication is going and flowing through. But you can do it on a manual checklist. But you do need to know all the different steps that have to happen. And if you do them in that order, that is going to set you up for success.

Adrian Schulz (02:05):

Can you take us through it just from a high level of what it looks like from beginning to end if it's done properly?

Carla Browne (02:11):

Sure. So in a perfect world, you're going to send out a notice to a tenant. Depending on what province you're in, that could be two or three months prior to the expiry of the lease. You're going to send out a notice to them on renewal conditions. So are you renewing, what's the new renewal rate, et cetera, et cetera. The tenant then is going to either renew or they're going to say they're leaving. So if they are leaving, you need to have a process in place to make sure you get that paperwork back on time. Otherwise, you're not going to be able to advertise it in time. So that's first thing, I guess, in making sure you have that.

Carla Browne (02:44):

Once you have it, you need to now get it up at advertised. So successfully, you want to check your ads. You want to make sure that the ad is still relevant. Was there any renovations during this tendency? Do I need to take new pictures? Is it the middle of summer and I only have a winter exterior picture? All of things are going to make a difference in how this property is going to show when you're trying to advertise it. So again, all part of the checklist.

Carla Browne (03:06):

Then you're going to look at prior inspections. So I recommend quarterly inspections so that you have a good pulse on what's happening in the property. If you don't have those, Adrian, then you're going to have to find a reason to go in and see that property because the first thing you need to know when you start preparing for the unit turn is what kind of condition is the property in? Do not do this: tenant's moving out at the end of the month, "I'm going to do the move out and I'm going to cross my fingers that everything's going to be okay." So you need to know what you're up against. And a lot of times we call these pre-move-out inspections and we will do them complimentary for our tenants because we will let them know, "Hey. I'm going to tell you what exactly you need to do in order to get your security deposit back." So when they don't do everything I just told you you need to do, they're not now surprised when you're doing the hold back. So again, these are all little checkpoints that are on this checklist.

Carla Browne (03:55):

And lots of communication. Just making them feel part of the process. What time do you want to move out? This is where you're going to put your keys. I mean, I could go on and on and this podcast would probably get really, really long, but it is being very detail-orientated of taking them through what's going to happen. And then once you know the condition, you can now set what your advertising might look like as far as when you want that move-in data. If you know you're going to have a lot to do, if you know this tenant is extremely messy, don't assume they're going to clean it in a pristine manner. We have our cleaners prepped at the end of the month and we tell them, "We think you're going to be doing X amount of properties based on what we know." So now I'm not scrambling for vendors.

Carla Browne (04:35):

If I know it's going to need new paint, I've already talked to my investor to say, "We probably are going to have to put some paint on this property." And then I can line up my painters to go in right after the move out. So we want to squeeze the timeframe as much as we can. That's really important for investors to understand. That is our goal as well. Keeping in mind, most property management companies are charging a percentage of rent. So when it's not rented, we're not getting paid. So we're very motivated to get this property up and running. Okay? So we're on the same page.

Carla Browne (05:04):

But I could take a property that a tenant has lived in for five, six, seven years, and I could probably increase the rent on that property by $300, $400, $500 a month. And I'm not kidding because I just did this one from $1,200 to $1,600 last week in one of the offices because the tenant had been there for a number of years and it was going to need a fresh coat of paint. Putting some paint on, changing a couple, light fixture, light switches, doing a few little minor upgrades so that it showed a lot better, was going to allow us to increase the rent. So the little investment that I was asking the investor to make in, they were more than going to make that over a year even if the property was going to be vacant for 30 days.

Carla Browne (05:49):

The other thing is with tenants... Interrupt me whenever you want because honestly, this one I could talk for a long time on.

Adrian Schulz (05:55):

No. I love it, but I love this step by step because if you self-manage or if you're professionally managed, here's how you need to do it.

Carla Browne (06:03):

Yeah. When a tenant is supposed to be out at noon on the 30th, I'll ask you the question, what happens? They're out. Everything's cleaned. Everything's ready. They got their keys ready to go. That doesn't happen every day.

Adrian Schulz (06:21):

Very rare. I'm not sure if I've ever witnessed it where nothing had to be done. And I would argue that there is the way that we would clean and the way that a professional cleaner would go and clean it up. And I think that a clean-smelling, freshly-painted, clean floor, shampooed and conditioned... Do you condition carpet? I don't know. But anyway, you get it is that first impression when they walk in is really important because that's how they're going to be expected to give it back to you as well. Right?

Adrian Schulz (06:52):

And we've talked many times on how clean, fresh paint, fresh carpet goes such a long way. Even sometimes changing the hardware on kitchen cabinetry, sometimes changing the bathroom taps, et cetera. There are many little things that don't have a huge cost that really show it well, and you can do all of them very quickly if like you said, it's pre-inspected, predetermined what needs to be done, pre-planned and booked with the service provider so that when they moved out at noon, right after, the painters come. Later that night, a lot of cleaning companies are willing to do cleaning after hours because they have staff that do it part-time. So there is the potential, if it's extremely well-executed through a process and a workflow, that you can in fact have one-day turnarounds. It's possible if it's planned the way you described.

Carla Browne (07:46):

Yeah. We talk about when a tenant is moving out, we don't take it negatively. That's the first thing. You don't want to get defensive. The tenant's moving out. "Why are you moving out? When are you going to be out?" They're a tenant. There's legitimate reasons why people need to move on and all of these kinds of things. You may have done something to upset them. And if you did, then you're losing the tenant. But if a tenant is moving out, give them a nice checklist of what needs to be done. Use the verbiage of, "It does need to be cleaned to our standard. So exactly how when you moved in. If you need some help with this, we have a preferred vendor that will give you an excellent rate for cleaning." And we love that, and lots of our tenants take us up on that.

Carla Browne (08:25):

It's super cost-effective, one less thing they need to do when they're in the middle of moving. And then they know, "Hey. They recommended them. So now they can't come back on the cleaning." And we don't. We go back on our cleaner for some reason, there was something missed or whatnot. So some of those things really help. But you said something that was really key and that it's that first impression when a tenant comes in. So if you think of a restaurant that you've taken your wife to, Adrian, when you first walk into the restaurant, if somebody greets you, they want to take your coat, they're asking your name, they're walking you to the table. It's that whole experience when you first walked in versus they ignored you, you're not sure where the coat rack is, no one's really responding to you, the front desk is on the phone. That's a different feeling you're going to get. And you will always remember that.

Carla Browne (09:15):

It's a proven fact that people will always go back to that first experience. So we talk a lot about this in our office is that how do we create that wow experience? Giving them this little welcome basket when they come in, all these little things so that if two days after they move in, they notice that the dryer's not working. It's not that big of a deal because they're always going to go back to that very first feeling that they had with our company. And you can create that by just giving yourself a little bit of time when you're trying to transition the unit from move out to move in.

Adrian Schulz (09:47):

You know what? We say it many times how important first impressions are on the resident and property manager relationship. And I think right after that is how successful you bring in that new resident, how successful you've done the unit turn. And I think number one, it will improve your rental income if you do a successful unit turn. And if it's done properly, not just fast but properly, those improvements will also last longer, right?

Carla Browne (10:23):

Yeah. That's a great point. But first impressions. In case anybody is actually watching this podcast versus just listening to it because we do post videos in our social media as well-

Adrian Schulz (10:35):

And we do hand puppetry, live hand puppetry on the show.

Carla Browne (10:38):

If this is their first one, we're setting this amazing first impression experience because we're matching. So this might be something that we have to really talk about before we get onto these podcasts in the future, Adrian. We got to coordinate our wardrobes because we're not even in the same city.

Adrian Schulz (10:53):

Yeah, no, I agree. The problem is at some point it becomes awkward to phone each other in the morning to plan what we're going to wear because I'm also trying to match what I wear with my six-year-old girl and my three-year-old boy. So I'm very challenged on how to dress just like them. I took Ava shopping on the weekend and bought her a new dress with flowers because I said, "Oh. Do they have a dress shirt like this for William?" And she said, "What about you, daddy? Why don't you get one of these dresses too?" Anyway, now that's real property management.

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