As a landlord, there are plenty of scary words. Terms like “water leak,” “late payment,” and “broken” can strike fear in even the most experienced landlord. However, is there any word more painful than “vacancy?” Water leaks can be fixed. Late payments can be tracked down. Broken appliances can be repaired. But vacancy? There’s not always an easy solution for that one.
The Problem with Vacant Rental Properties
The thing about vacant rental properties is that time doesn’t slow down. One week can turn into one month in a heartbeat. Next thing you know, your property has been sitting there for six weeks and you’re about to miss collecting your second straight rent payment. All of the sudden you’re asking yourself, “Can I even keep this property?”
Under very few circumstances is having an empty property okay – and there are lots of negative consequences that can spawn from vacancy:
The most obvious and significant problem with owning a vacant rental property is that cash flow is affected. Ideally, you’ve already accounted for some vacancy in your cash flow calculations. You should have a pretty good gauge on the average vacancy rate in your area, but the general rule of thumb is to assume that a property will sit empty for one month out of the year. Therefore, you should be accounting for 1/12th – or 8.33 percent – annual vacancy.
But what happens when vacancy exceeds your calculations? Now you’re suddenly forced to reshuffle personal expenses, find a way to pay the mortgage, determine whether or not to cut utilities, and more. If you have a massive portfolio with tons of properties, a single extended vacancy may not seem like a big deal. But what do you do when one vacancy accounts for a sizeable portion of your cash flow?
In order to be a successful long-term investor and landlord, you absolutely must deal with vacant rental properties sooner rather than later. A vacancy is like a small cancerous spot that can quickly spread to the rest of the body.
Aside from cash flow, you should also be wary of security risks. Criminals are always prowling around looking for easy targets, such as empty homes. They’re quite adept at targeting these properties and the last thing you can afford is a break-in or vandalism. Whether it’s broken windows, stolen appliances, or something else, a burglary will further impact your cash flow – not to mention your timeline for getting a tenant in the property. Here are some of things you’ll want to do to enhance security:
If you follow this advice, you shouldn’t have too much trouble. However, the moral of the story is that it’s better to have an occupied rental property than a vacant one.
The third major problem with vacancy is that the longer it goes on, the more likely you are to do something irrational. As they say, desperate times call for desperate measures. You could end up lowering your rental rate to a figure that doesn’t make sense, accepting any tenant that comes along, or even dumping the property altogether. You never want to find yourself in a situation where you make a decision based on fear.
3 Specific Things You Can Do
Ultimately, once a property is vacant for longer than 30 days, something must be done. This timeframe could be off by a few days in your specific neighborhood, but one month is a good rule of thumb.
Should you find yourself in this situation, here are a few specific things you can do to fill your vacancy:
The first step is to develop a lead generation strategy that ramps up your number of applicants and interested parties. You should be advertising via multiple avenues. This may include physical signage, online listings, social media, and print classifieds. The more places you have your listing, the more traffic you’ll naturally receive. This will create more work in terms of filtering through applications, but it’ll also increase the chances of finding the right tenant.
It’s hard to get psyched up for property showings – especially when you’ve had a handful of people come through and it’s been nothing but a waste of time – but you have to treat each showing like its your only showing.
“The way you present yourself and your rental property during an open house visit is probably the single most impactful thing you can do to turn curious visitors into committed applicants,” says landlord Jennifer Maughan. “Don’t lose those ideal tenants by dropping the ball during the visit.”
Finally, you have to keep tenants satisfied once you have them in the fold. The best way to fill vacant rental properties is by avoiding turnover altogether. While it’s impossible to prevent all turnover, you can certainly reduce your rates by keeping tenants satisfied. This means attending to reasonable requests, facilitating communication, and not getting worked up over inconsequential details.
At Green Residential, we’re committed to helping our clients manage their properties in a professional and profitable manner. Part of this commitment involves reducing vacancy rates by keeping high quality tenants in properties for longer periods of time. We do this through careful tenant screening, responsive service, and meticulous attention to detail.
If you’re interested in learning more, please contact us today!
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