Everything That Property Managers Need to Know About Unit Transfers
Everything That Property Managers Need to Know About Unit Transfers. Why having a great unit transfer policy is needed.
When working in property management, a key goal is to keep every available unit filled with a stable, rent-paying tenant. And that requires you to vet and screen for good tenants, fill your units with responsible renters, and work to keep those tenants year after year.
The problem is that many renters don’t want to live in the same apartment for years on end. One of the benefits of renting is having the flexibility to pick up and move when the mood strikes.
But the fact that a tenant is ready to move to a new apartment doesn’t always mean you need to lose them. On occasion, you may have a tenant that would prefer to do a unit transfer instead.
Not sure how to handle an apartment transfer?
This guide explains everything a property manager should know about unit transfers. Follow along as we talk about the pros, cons, and policies to put in place.
How Common is a Unit Transfer?
Unit transfers aren’t an everyday occurrence, as most tenants are more likely to move to a different building than to transfer to a different apartment within the same building or complex.
For property managers, unit transfers can be complex, and they have to end the current lease for the tenant’s current apartment and start a new lease for the new unit. Yet many will agree that they’re better than the alternative of losing a good tenant.
Why Renters Like Unit Transfers
There are all sorts of reasons why a tenant may want a unit transfer.
For some renters, it’s the need to move from a one-bedroom apartment to a two-bedroom apartment to accommodate a growing family. For others, it may result from losing a roommate and needing to downsize from a two or three-bedroom unit into a one-bedroom.
In some cases, tenants want to transfer units because they’re looking for upgrades.
Sometimes, a unit transfer may arise from a problem that a tenant has with a neighbor.
The greatest motivator seems to be a newer, more updated apartment with better amenities, a better view, or a better location within the building.
There are many reasons why a unit transfer can be beneficial to a tenant. Yet, as a property manager, you’ll need to decide if an apartment transfer works for you too.
See Also: The Complete Guide to Virtual Property Management
The Pros of a Unit Transfer
Not sure if you should allow or encourage unit transfers within your apartment complex?
There are quite a few reasons why you may want to permit unit transfers for good, rent-paying tenants.
Tenant Retention
It’s always easier to keep a great tenant than to put in the time, money, and effort to find a new one. When a tenant is approaching the end of their lease term, most property managers begin offering benefits.
Common examples include in-unit upgrades or promises not to increase the rent to encourage those tenants to stay. But, in some cases, those benefits won’t be enough to keep the tenant around for another year.
A unit transfer might.
Unless you have a waiting list of new residents looking to move in, retaining an existing tenant is almost always a better option.
Unit Transfers Provide Higher Occupancy Rates
Keeping occupancy rates high is essential, and having two empty units is worse than having one.
For a tenant to do a unit transfer, you’ll need an available unit for them to move into. And if you have an open unit, it’s because you haven’t yet been able to find a new tenant to move in.
If your current tenant also moves out, you’ll have two empty units without an existing lease agreement rather than one. This scenario will only bring down your occupancy rates.
The Potential To Collect More Rent
A unit transfer can also be an opportunity to collect more in rent.
If a tenant transfers to a bigger unit, you can have them sign a new lease and agree to pay a higher rent.
If a tenant is downsizing or moving to a comparable unit, have them sign a brand new one or two-year lease that starts on the day of the move.
This strategy will work to your advantage the more time they have left to live out their current lease.
For example, a tenant whose lease ends in two months won’t make too much of a financial difference.
But say a tenant has six months left on their current lease. In that case, a unit transfer is a way to ensure that you’ll collect at least another twelve months in rent from them.
When a tenant asks to do a unit transfer, consider it a pat on the back.
No one wants to stay in an apartment building that they don’t like living in. And when you have tenants that would prefer to move within the building over moving out of it entirely, it means you’re doing something right!
Looking for new ways to keep good tenants? Read 13 Unique Ways to Boost Your Resident Retention.
Unit Transfers: The Drawbacks
Unit transfers may be the key to retaining a tenant that you don’t want to lose.
But there are some drawbacks and pitfalls that you should be aware of. By knowing the downsides of unit transfers, you can take the steps needed to avoid running into complications.
It May Mean More Work for You
For a property manager, moving an existing tenant into a new unit may add a bit of work to your plate. And that’s because you’ll need to repeat all the work you’ve already put into renting the empty unit for the unit that your tenant plans to evacuate.
With a unit transfer, here are some of the various steps (and extra tasks) you’ll need to add to your workload:
- Take down the listing of the empty apartment
- Paint, clean, and renovate the newly-vacated apartment
- List the new apartment vacancy online and on your website
- Show the new apartment to prospective tenants
- Prepare a new lease for the transferring tenant
- Prepare a new lease when you find a new tenant to move into the other unit
Time is money, so consider how much time you’ve invested into renting the empty apartment before you allow an existing tenant to move into it.
Have you already vetted and screened new tenants?
Are you close to getting them to sign a lease?
Then, you may want to take the unit transfer option off the table and keep your current tenant in the unit that they’re already in.
Added Expenses
Doing a unit transfer can also cost you more money than you’re willing to spend. First, you’ll have the expense of cleaning and renovating yet another apartment unit. You’re also on the hook for listing and marketing fees. Then, there’s the time you lose showing the unit to potential new tenants.
Is your current tenant looking to move to a new unit because their current unit needs upgrades and renovations?
If so, their old unit may be difficult to re-rent as is. Or you may need to incur the expense of doing renovations before listing that apartment online.
Here’s something to keep in mind:
If your tenant’s old unit is more challenging to re-rent, it could take several months to rent it out, if it attracts renters at all. That could mean several months without collecting income on the unit.
Setting a Dangerous Precedent
Property managers often worry that allowing unit transfers can set a dangerous precedent. After all, the last thing you want is a constant flow of tenants moving in and out of different units within the building.
Frequent unit transfers can be overwhelming, but there is a way to allow them without encouraging them.
It’s 100% reasonable to limit who can and who cannot do a unit transfer.
For example, you can decide that unit transfers are only available to tenants who:
- Need maintenance and repairs in their existing unit
- Want to upgrade to a larger unit
- Have two months or less left on the current lease
- Have a perfect payment history and are in excellent standing with no complaints or late payments on file
A great strategy is to have some basic stipulations for those who can and cannot transfer units.
This approach effectively cuts back on the number of transfers that take place within your building without denying them altogether.
Hoping to refill vacant units? Learn how to prepare your complex for new tenants with our Detailed Apartment Make-Ready Checklist.
When a Tenant Asks To Transfer Units …
Don’t wait until a tenant asks you to do a unit transfer to start thinking about the pros, the cons, and all that it entails. Prepare yourself ahead of time so that when a tenant initiates a transfer request, you know exactly how to answer their questions.
Here are some tips on how to make unit transfers work to your advantage:
Have an Apartment Transfer Policy in Place
Have a clear and concise apartment transfer policy in place and add it as a “unit transfer” clause into your original lease agreement. That way, tenants will know what to expect if the situation ever arises.
Include Lease Terms and Fees
Your policy can (and should) include leasing terms that benefit the apartment building and property management company. These can consist of transfer fees and the need to fill out a new application and pay a new application fee.
In your policy, be clear about all other fees and obligations.
Take the example of a tenant looking to move into a bigger, more expensive apartment. Let them know that they may need to undergo a new credit check or make another security deposit to cover any future damages.
Your policy should also specify that a unit transfer requires a tenant to sign a brand new lease. Don’t allow tenants to transfer units only to live out the length of their existing lease, which could be a few months.
You might wind up losing money on the deal!
Include Limitations
You may also want to exclude vacant units that are in the leasing process.
Do you already have a tenant vetted who’s planning to make a security deposit and sign a lease?
If so, consider that unit already rented and unavailable for a transfer.
Discuss the Security Deposit
Some property managers choose to roll a tenant’s security deposit over to the new unit. Others prefer to refund it (or keep it to cover damages) and collect a brand new deposit for the new unit.
Let your tenant know how you intend to handle the refund or retention of their security deposit and that they should be ready to make a new one if need be.
Establish a Timeline
It’s also essential to have a specific timeline for move-in.
Don’t allow tenants the option to take a month or two to pack and move. Instead, specify that unit transfers must occur within a short time frame, such as 7 to 14 days.
Inform Your Tenant of Your Policy
With a strict unit transfer policy in place, it will be much easier to have a conversation with tenants that want to move elsewhere in the building.
If a tenant asks to do a unit transfer, thank them!
Let them know that you appreciate their interest in staying in your building and inform them that you have a definitive policy in place.
If you’ve included the established rules and regulations in their lease, let them know that they can find the details there. If you didn’t include it in their lease, present them with a copy of your official transfer policy.
The most radical approach to unit transfers is to have a “no transfer” policy. This type of policy doesn’t allow any tenant in any circumstance to transfer from one apartment to the other.
Many property managers don’t want to deal with unit transfers.
Yet, keep in mind that by not allowing them, you could run the risk of losing good tenants that you’d rather keep.
Like all aspects of property management and leasing, there are both pros and cons to unit transfers.
But no matter how you choose to handle them, one problem falls into your lap — at least one empty apartment that needs a tenant.
Use your best judgment. Weigh the pros and cons. And ask yourself this question before allowing a tenant to do a transfer:
Would I rather rent the empty unit I already have or prepare and market the unit that my current tenant wants to leave?
It all boils down to whether you want to keep a good tenant happy or run the risk of losing them. There is no clear and definitive answer, and every property manager will need to make that decision for themselves.
LeaseLeads is your #1 partner in keeping occupancy rates high, even if you allow unit transfers! This web tool will link prospective tenants to an open unit in their preferred price range with the amenities ranked high on their lists.
