What is "Churn" and why Investors should pay attention to it....
Churn might be the best metric to monitor unnessary vacancy costs.
Churn, in property management, refers to the owner/client turnover rate, indicating how many clients choose to leave a property management company in a given period. It is an important metric for assessing client satisfaction and retention, resident satisfaction and future growth strategies and business planning. But, I have a confession to make; Boise TurnKey has never formally tracked this number! Before anyone calls the property management police, allow me to explain.
Truth be told, I had never heard the term “churn” used in property management up until I attended a national conference a few years back. I was casually mixing and mingling with a group of other managers from around the country when the topic of “key metrics” came up, and someone dropped the term and their percentage into the conversation. They spoke with such authority around it, and were reporting their numbers with pride. I felt like such a dummy needing to pump the breaks and ask for clarification. Of course, when a group of leaders in the field have to stop and accommodate your basic question, it’s accompanied with a lot of “bless your heart” and sideways glances as if you had broccoli growing from your ears. But that wasn’t the worst of the night!
As they explained how to calculate churn carefully to me, and fortified the discussion around how great their numbers were- I was able to easily share our company’s percentage. That’s when things got exceptionally awkward. Again, flashing my newbie credentials, I promptly said, “we’re at 0%.” After a few more nudges for clarification, “real numbers,” and eye rolls, I was able to confidently fire back this accuracy. That year in our business, we had experienced ZERO percent churn- good, bad, or neutral. I suppose I didn’t make any new friends that night.
Fast forward to 2025. We are keeping an eye on our churn, but it doesn’t demand much of our attention. Once per year (typically right around tax prep time, as we’re reviewing all financials to report to anyone we worked with the prior year), we pull all hard copy files, 1099s, and year-end reports. This year, I have a stack of 26 files on my desk that represent properties we no longer represent. Last year, in total, we managed 309 units. This means the raw churn rate that Boise TurnKey saw was 8%. National averages tend to trend around 25% for property management, so in relative terms- this number is one-third less than average. We’ve got a pretty rad rate! That said, this doesn’t REALLY tell the entire story. Of the 26 properties lost, 5 of them were considered “bad” churn, 8 were considered “neutral,” and 13 were considered “good” churn.
Good churn means that the client sold the property using our team to represent them. In these cases, we can work with residents to make the process less stressful, and usually relocate them to a new property. It’s a win-win for everyone, given the circumstances. Also, good churn means that we initiated ending the relationship with the client- we do this either for poor maintenance (not wanting to care for a property up to our standards), poor behavior (in one case, it was using the neighbors to bully the residents), or perhaps not following our contract guidelines. Our “good churn” rate was 4.2%!
Neutral churn could be a situation where the owner moved back into a property, sold the home using another agency, or was foreclosed on. This was 2.6%. Bad churn refers to a client letting us go. We had 5 properties out of 306 for 2024 that were considered bad churn, meaning only 1.6%. If 25% is truly the national average, we’re pretty darn excited to report these statistics…and maybe we will keep a closer eye on that metric for funsies!
Question: So what should we do with this information? It seems like we’re on a good path regarding churn, but our work is never done. How do we use the data to continuously improve our services and learn from these experiences?
Answer: For one, we’ve developed a screening process when vetting new clients. In order to ensure we’re both a good fit for each other’s management style and needs, we use a rubric to help us sort out the folks that may not want to properly care for their properties, or those that have an unhealthy attachment to the neighbors/etc. Two, we have embarked on a survey journey- be prepared to receive a handful of requests for feedback this year, everyone! From residents, clients, and vendors, we want to hear honest answers about our services in real time. We aim to keep satisfaction high, and are examining our survey results and comments weekly to ensure we’re keeping up with or exceeding folks’ expectations.
Three, this may seem obvious, but we’re reacting quickly to feedback we receive. If we received a less-than-average score on a maintenance survey, we’re diving into the issue to determine if something about our policy, communication, or procedure broke down. Was it a vendor that was rude to a tenant, or inflexible about a solution or scheduling? We seek to fix issues as quickly as possible, in order to prevent future disappointment.
I wish I could go back in time and remember the numbers that those conference folks were sharing with me! I imagine, now that I’ve cut my teeth by loosely monitoring churn, I could at least participate in the conversation without too much scoffing. I’m not sure I would be making many friends, still, but we’re resting our heads easy every night knowing that our very low churn rate indicates satisfaction and stability overall!
