Vacancy. That word causes more fear, worry, and angst than almost any other word in the landlord’s vocabulary. Of all the different forums that I am in involved in, this is the word that everyone brings up as a reason to not continue land lording.
While there are certainly scary words in land lording, my least favorite are eviction, repair, water, and broken.
Vacancy is not on my list because, honestly, vacancy is the one thing you can control the most!
How to Remove Vacancy from Your Vocabulary
I hear over and over in the real estate world that anything will rent at the right price. What I see the most is that someone doesn’t want to reduce a price so the property will sit empty. Is letting it sit while waiting for that perfect price tenant really worth it?
What will that eventually cost you?
Say your house rents for $2,000/month. If your house sits empty for six months, not only will it leave a bad taste in your mouth, but you will lose $12,000. That’s a lot of money to be made up over time and, honestly, a huge loss!
The question I ask is, “Why are you taking such a hit?” Why aren’t you lowering your rent to $1,900 or $1,800 until you get it rented instantly? Yes, you might take a small hit, but it’s rented.
I have never lost a day of rent. But I haven’t always been able to get top rent either! The key to remember is that your lease length is flexible. You don’t have to sign a 12-month lease. If it’s a bad time of year, sign a lease until it’s a good one — four or six months from now. Yes, you are taking a hit, but a much smaller hit than you’d be taking with an empty house!
The longer a house sits on the market, the more stale it gets. Stale is not a term you want associated with your listing. You want to get aggressive, not only in your marketing, but also in your pricing. I have found that even $50-75 can make a huge difference. In my experience, people type in a number for the max, for example $1,900. So if you are at $1,950 they won’t see you listing. While sometimes this means taking huge drops, other times it just means small drops.
I have had to lower my rent as low as $100 less than I anticipated because of a last minute move. On the other hand, my house was empty barely a week from the time I put it on the market until the lease was signed. Lowering the price was the difference of leaving the house empty for another three weeks!
Not only do you have to watch for the costs vacancy wise, but also for insurance premium increases. Many companies require you to have a different type of insurance because of the greater risk for something happening. Vandals, copper thieves, and squatters have been known to hit vacant homes at a great expense to homeowners.
Having vacant homes is not a possibility! So be proactive, start advertising/showing the house as soon as you have a known upcoming vacancy, have a break lease clause to cover you if your tenant needs to move out early, and be conscious of the market rates. Rates go up (YEAH) and go down (NAY) but the key is to watch the market at all times so you can be the most prepared!0