How To Calculate Your Average Tenancy Length

If you own or manage rental property, you’ve probably wondered about your “average tenancy length” — that is, how long do your tenants stay in the property, on average, before moving?

When a tenant moves out and the property needs to be made ready to rent again (the industry term for this is a “turn”), rent income is disrupted and you often incur large expenses to bring the property back to a marketable condition. A primary goal of any investor or manager should be reduce the frequency of turns, and the way to do this by increasing your average tenancy length. But you can’t measure progress in this arena until you have a consistent and effective method for calculating it.

The calculation is not as simple as it seems. You might be tempted to just look back at all your old lease terms (for tenants who have already moved out) and average their lengths. However, this fails to account for current tenants who may be in the property for many years to come — some of which will have only just recently moved in. The problem is especially bad for relatively new properties or management companies, where the historical leasing data going back many years may be unreliable, unavailable, or simply irrelevant.

A better approach, requiring only 1 year of data, is to calculate unit churn, otherwise known as tenant turnover. To calculate the generic "average length of X" - you simply take the annual "churn" rate (in our case, % of total leases who moved out) and do 1 over that. An important note is that you need to know the total number of active leases at the beginning of the time period, and track those specific leases.

By way of example, I did the math for our company, RL Property Management, which managed 272 residential units at the beginning of 2017. By the end of that year, 78 of those leases had ended and the tenants moved out. 78/272 = 28.6% churn/tenant turnover (this means a lease renewal rate, or retention rate, of 71.4%). Now, if we do 1/0.286 = 3.5, we can see that our average tenancy length is about 3.5 years (at least, per the 2017 data). What is your average tenancy length?