It’s a new year, we’re still in the midst of a pandemic that threatens to take us backward instead of forward in our progress towards normalcy. 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. In the current marketplace, vacancies are even more expensive than usual.
Many property owners and landlords are still reeling from the imposed health mandates and government bans on evictions that marked much of 2021. These measures led to significant losses in income for property owners and any units that remain vacant are only exacerbating the difficult financial challenges that currently exist.
The 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 your real estate holdings. Since there is a repeated loss in revenue being experienced for every month the unit sits empty, property owners are forced to dig deeper into their own wallets to pay expenses such as a mortgage, utilities, maintenance, and repairs.
The longer these units sit unoccupied, the longer a property owner must turn to his or her own coffers to cover the costs related to operating the business. One vacant unit could make the difference between implementing much needed improvements to the property and delaying this work until a future date. The latter poses a greater risk of small issues turning into bigger (and more expensive) problems.
The pandemic has already wreaked havoc on the rental property market, don’t let things get worse due to extended vacancies. The following are some of the most effective methods I know for retaining the best tenants yet being fully prepared to act should one of them elect to move out for whatever reason.
What I mean by that is knowing which areas of the property need to be updated or replaced at the time of a vacancy. I’m not suggesting you do the bare minimum, because prospective tenants will have an unfavorable view of your property from the start. That 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 to rent and their goal is to get the most bang for their buck.
I’m referring specifically to being smart about your upgrades. Test the functionality of everything inside the unit, from the drawers and cabinets to the appliances to the lighting and plumbing fixtures. If something is broken, then fix it. If the aesthetics of the unit look worn and faded, the paint is chipped or the walls have holes in them, then fix it.
Always present the unit in the best possible condition. Just don’t go overboard. Appliances that are in good working order can be left inside of the property. Should you replace them with more energy-efficient models? Probably. But that can be something you decide to do after a tenant has moved in and you are generating revenue once again.
Any smart property 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 rental price to attract prospective future tenants. If your property is located is a highly desirable location with plenty of foot traffic, local businesses, and good schools, then you can expect to ask for more. Unfortunately, the first inclination of many landlords is to overprice their rental properties because they believe someone will pay that amount, especially if the location is so 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 is more affordable. This leaves the property owner with a vacancy once again and the expenses that go with upgrading and repairing the unit so it is suitable for the next occupants. In addition, it may be 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 a few weeks, even a few months if you don’t set it properly. Making your property more expensive to rent when compared to similar surrounding properties can actually cost you in the long run. Do the research, find out what other units are going for in the vicinity. From there, you can then decide how to price your property to entice a reliable renter who can afford to pay the rent on time and stick around for awhile.
When a tenant moves out, the property owner should always be wondering why. Some situations are unavoidable as a tenant may be starting a new job elsewhere or moving in with a significant other in another neighborhood, or they have decided to purchase a property of their own.
But when the tenant is moving out because he or she are dissatisfied with the property or the management in charge of running it, that is a significant problem you need to acknowledge. Good property 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 live there and pay for the privilege.
Don’t take your tenants for granted. Treat them fairly and with respect, they will do the same with 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.
Now the task ahead of you is to find new tenants. In my next article, I’ll review the steps you can take to fill a vacancy as quickly as possible