Real Estate Turnover Rate Calculator
What is the Real Estate Turnover Rate?
In the real estate industry, the turnover rate is a critical metric used by investors, agents, and property managers to measure activity and liquidity. Whether you are looking at a specific neighborhood's sales activity or the tenant stability in an apartment complex, the turnover rate reveals how often properties change hands or tenants cycle through units within a specific timeframe (usually one year).
How to Calculate Real Estate Turnover Rate
The formula for calculating the turnover rate is straightforward. You divide the number of units that were sold or moved into by the total number of units available in that specific set, then multiply by 100 to get a percentage.
(Number of Sales or Move-outs / Total Number of Units) x 100 = Turnover Rate %
Market Turnover vs. Rental Turnover
Depending on your goal, you might use this calculator in two different ways:
- Market Sales Turnover: Used by Realtors to see how "hot" a neighborhood is. If a neighborhood has 1,000 homes and 100 sold last year, the turnover rate is 10%. High turnover indicates a high-demand, liquid market.
- Rental Property Turnover: Used by property managers to track tenant retention. If an apartment building has 50 units and 10 tenants moved out this year, the turnover rate is 20%. In this context, a high turnover rate often indicates higher costs due to cleaning, marketing, and vacancy periods.
Real-World Example
Imagine you are looking to invest in a condo complex called "Sunset Towers."
- Total Units in Complex: 200
- Units Sold in the last 12 months: 12
Calculation: (12 / 200) = 0.06. Multiply by 100 to get 6%. This tells you that roughly 6% of the owners in that building decide to sell every year, which helps you estimate how much inventory might be available in the future.
Why Does Turnover Rate Matter?
For investors, a very low turnover rate in a residential neighborhood might mean that residents are stable and love the area, but it also means it is harder to find a "deal" because supply is low. Conversely, a high turnover rate in a rental portfolio signals that you may need to investigate why tenants are leaving—is it the management, the rent price, or the location?