Vacancies are a major headache for property investors. While your property is vacant, you’ll still be responsible for paying the expenses of property ownership, but you won’t have any income being generated. On top of that, you’ll be responsible for paying the costs of getting a new tenant into the property, including marketing and tenant screening.
If your property is vacant too often, it can completely ruin your profitability model.
That said, vacancies occur naturally no matter what you do; even in the best possible situation, your tenants will eventually move due to changing needs. You can do your best to reduce the occurrence of vacancies, but it’s also important to make the most of the vacancies you do experience.
So how do you successfully manage a property vacancy?
Do a Post-Mortem Analysis
First, do a post-mortem analysis and figure out why your tenant is leaving. This could have been an unpreventable loss, or there could be something you could have done to prevent this eventuality. There could be important lessons here, which you can apply to your property management strategy in the future.
Common reasons tenants leave include:
- Rent increases. If rent increases too much or too quickly, it’s going to force your tenants to leave. If they can’t afford to stay, they don’t have much of an option.
- Dissatisfaction with the property. This variable is almost entirely within your control. Issues with the property, such as unfixed points of damage, low quality upgrades, and disappointing living conditions, can force tenants to leave.
- Neighborhood issues. If the tenant has a problem with the neighborhood, they may also leave. Some of these issues may be beyond your control, but you may be able to step in to help things like issues with noisy neighbors.
- Major life changes. A major life change, such as a new child, a separation/divorce, or a new job can all force a tenant to move. There isn’t much you can do about this.
Inspect, Upgrade, and Remodel
When a property is vacant, you won’t generate income. But it isn’t all bad – when the property is vacant, you’ll also have a chance to inspect, upgrade and remodel the unit however you like. During a vacancy, remodeling is convenient – and it can help you make more money over time.
No matter what your plans are, you’ll want to conduct an inspection. Are there any points of damage or issues caused by the tenants that you’ll need to deduct from their security deposit? Are there any points of maintenance or repair that need to be addressed before the next tenant moves in? What is the current state of the property and are there any major improvements that need to be made?
Next, consider upgrading and remodeling different elements of the unit. It may cost a few hundred to a few thousand dollars, but it may be worth the money if you can see a substantial return in terms of higher rent prices or higher tenant retention in the future.
Some of the most valuable upgrades and remodels include:
- Kitchen remodel. Remodeling the kitchen can be expensive, but a brand-new kitchen is a major benefit for tenants.
- Bathroom remodel. Similarly, a new bathroom can set you back several thousand dollars, but it can serve your tenants well for many years to come – and help you fetch higher rent.
- New appliances. Consider upgrading the appliances that come standard with the unit for an even higher appeal.
- Curb appeal upgrade. The exterior of the property forms first impressions. Invest in it to make it even more appealing.
Work to Fill the Vacancy
Once the property is in top condition, you’ll need to spend time and effort filling the vacancy. Do note that it’s important to screen your tenants carefully; while it’s tempting to take on the first applicant to reestablish your cash flow, it’s much better to take your time and make sure this tenant is going to be a good fit.
To fill the vacancy faster:
- Price the property competitively. Look up rent prices for similar properties in the area. Price your unit as competitively as possible.
- Take high-resolution photos. Show off what makes your property unique. Take lots of high-quality photos and make them available.
- Write compelling copy. Tell people what they’ll gain from renting this property with compelling copy.
- Use multiple marketing and advertising platforms. List the property on a number of marketing and advertising platforms for the greatest possible exposure.
Vacancies can be a pain, but they can also provide you with an opportunity to improve your property management strategy. Take the time to analyze the origins of the vacancy, upgrade the property, and market it effectively to find your next tenant.