How to Avoid Long-Term Rental Vacancies and Safeguard Revenue Even a single empty unit can have a substantial negative impact on your income.
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It's a new year, yet we're still in the midst of a pandemic that threatens to take us backward rather than forward in our quest for normalcy. Many property owners and landlords are still reeling from the imposed health mandates (including government bans on evictions) that marked much of 2021. These measures led to significant losses in income, and any units that remain vacant are only exacerbating the financial challenges that currently exist. So, it's more critical than ever to ensure that all of your units are occupied to keep revenue coming in with some level of consistency, because in the current marketplace, vacancies are more expensive than ever.
Disadvantages of vacancies
Landlords who have empty properties are losing out on income, plain and simple. Even one vacancy can have a tremendous negative impact on real estate holdings. Since there is a loss in revenue for every month a unit sits empty, owners are forced to dig deeper into their wallets to pay expenses such as a mortgage, utilities, maintenance and repairs.
The longer a unit sits unoccupied, the longer an owner must turn to his or her own coffers to cover costs related to operating the business, and one vacancy could make the difference between implementing needed improvements and delaying this work until a future date. The latter, of course, involves a greater risk of small issues turning into bigger (and more expensive) problems.
The following are some of the most effective methods I know for retaining the best tenants, yet being prepared to act should one of them elect to move out.
Knowing which areas of the property need to be updated or replaced at the time of a vacancy is critical, and so is avoiding the temptation to do the bare minimum, as that means prospective tenants will have an unfavorable view of your property from the start. (It will also reflect poorly on you as the property owner.) Renters are smart; they have a budget in mind when they start looking for a place and their goal is to get the most bang for their buck.
When it comes to upgrades, test the functionality of everything, from the drawers to the cabinets, appliances to lighting to plumbing fixtures. If something is broken, fix it. If the aesthetics of the unit look worn and faded, if the paint is chipped or the walls have holes in them, then address those issues in a way that present the unit in the best possible condition.
But that doesn't mean going overboard. Appliances in good working order can stay. Should you replace them with more energy-efficient models? Probably, but that can be decided upon after a tenant has moved in and you are generating revenue once again.
Any smart owner is going to take the time to research the fair market value of rental properties in the neighborhood. Without that critical data it's nearly impossible to set a fair price to attract prospective tenants. If the property is located is a highly desirable location with plenty of foot traffic, local businesses and good schools, then ask for more. That said, the first inclination among too many landlords is to overprice rental properties, especially if the location is attractive. But two things will typically occur instead:
• A tenant may stick around for a year or two and then move to another neighborhood that's more affordable. This leaves the property owner with a vacancy once again, along with the expenses that go with upgrading and repairing the unit so it's suitable for the next renters.
• It becomes more challenging to attract those next occupants, who may not want to live in the neighborhood because the rental price is so high.
Setting a price is always a gamble, because you may be left without income for weeks or months if you don't do it properly. Making your property more expensive to rent when compared to similar surrounding properties can actually cost you in the long run, so do the research, including what other units are going for in the vicinity. From there, you can decide how to price in order to entice a reliable renter who can afford to pay on time and stick around.
Responsiveness and move-out analysis
When a tenant moves out, the property owner should always consider why. Some situations are unavoidable, such as a tenant starting a new job elsewhere, moving in with a significant other in another neighborhood or deciding to purchase a property of their own. But when a move-out is because he or she is dissatisfied with the property or the management running it, that's a significant problem you need to acknowledge. Good managers are responsive, transparent and communicative. When tenants feel safe, comfortable and appreciated in the place where they live, they are more willing to continue to pay for the privilege.
So, don't take your tenants for granted. Treat them fairly and with respect and they will do the same for you. If and when a problem arises, work it out honestly, and if the tenant ultimately decides to move out, you can rest easy knowing you did everything within your power to avoid it.