The direct answer
A turnover-versus-renewal decision compares the economics of keeping an existing tenant with the cost and potential upside of replacing that tenant. The right comparison includes renewal rent, expected market rent, vacancy days, make-ready work, leasing costs, concessions and the probability that the replacement tenant actually achieves the projected rent.
Build a renewal case
Estimate the proposed renewal rent, expected collection, any renewal incentive and the probability the tenant stays. The renewal case often has little or no downtime and lower transaction cost.
To apply the approach to an editable scenario, use the Rent Increase Calculator. For the neighboring question, explore Net Effective Rent Calculator.
Build a turnover case
Estimate market rent for a new tenant, then subtract vacancy, make-ready, marketing, leasing fees and concessions. Include a downside case in case lease-up takes longer or the new rent is lower than expected.
Compare over the same horizon
A one-time turnover cost should be compared with the incremental rent over a meaningful period such as twelve or twenty-four months. A higher new rent can still lose economically if the upfront turnover burden is too large.
Worked example
Suppose renewal rent would be $1,950, while a new tenant might pay $2,100. If turnover causes one vacant month plus $2,000 of make-ready and leasing costs, the $150 monthly rent increase takes a long time to recover the upfront loss.
Common mistakes and limitations
Do not reject a renewal simply because market rent is higher. Compare the achievable rent premium with downtime, lease-up costs and uncertainty.
Pure arithmetic. It does not determine whether a rent increase is legally permitted in a specific jurisdiction.
Frequently asked questions
How do I compare a renewal with tenant turnover?
Model both cases over the same time period and include vacancy, make-ready, leasing costs, concessions and expected rent.
Can a below-market renewal still be financially better?
Yes. Avoided vacancy and turnover costs can outweigh the rent premium from replacing the tenant.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- IRS — Publication 527 (2025), Residential Rental PropertyRental income and expense concepts; operating/rental expense context.
- Office of the Comptroller of the Currency — Comptroller's Handbook — Commercial Real Estate LendingNOI, direct capitalization, cap-rate valuation and DCF concepts for commercial real estate.
Read our editorial policy for the scope of these educational methods.