How Long Should My Property Be Vacant?
So, how long should your rental stay vacant? It really is an important question with more than a couple of variables. For starters, contrary to popular belief, vacancy is the most crucial determinant in establishing profitability for your rental asset. This is why the formal practice of setting parameters for ‘acceptable’ periods of vacancy is vital. You can only change what you measure, and you can only measure what you have defined. Let us identify some of the variables.
Time of Year
Type of Property
Condition of Property
Location of Property
Zeitgeist of Location
Desired Rent Price
Desired Lease Term
Scrutiny of Screening Process
While this is not an exhaustive list, it is a list that should stimulate the idea that these variables are connected to each other. It should also ignite thought. How will adjusting them decrease the amount of time your asset sits vacant? Which, in turn, decreases the amount of time you go without income and most people want a profitable venture.
Time of Year directly correlates with the number of potential tenants looking for a new home. Spring and Summer are peak seasons for folks looking to make a move. Fall and Winter yield a lesser pool of prospects.
Type of Property corresponds with the desirability of your asset to potential renters. For example, a detached single-family home is more desirable than an apartment because the home does not share any walls. However, you must recognize the demographic that your asset most appeal to. Once again, a detached single-family home is probably more desirable than an apartment, but not in the eye of a young 20’s-something individual. It is not uncommon for them to want to be close to other individuals like themselves.
Condition of Property motivates the ‘Lease-ability’ of an asset. A property must present well if you wish to have it leased out early on in its vacancy. General cleaning coupled with easy staging techniques is effective. For example, hanging a hand towel from the dishwasher or setting a bowl of fake fruit on a table creates a ‘homier’ feel.
Marketing Budget controls how many individuals you reach with your property. The bigger your funnel, the opportunities you will have to a) get valuable feedback on your asset in order to make necessary changes and b) close prospects.
Location of Property affects the desirability and accounts for competition. Doing preliminary research into whom you are immediately competing against is probably the most important factor in determining how long your asset will remain vacant. If your rental has sat on the market for what feels like a long time, check to see how your property compares to the others around it. Typically, a .25 mile search radius is appropriate.
Zeitgeist of Location impinges on the presentability as well as the desirability of your rental property. It is key to understand the cultural dynamic of the location in which your property lies. This will give direction for scheduling showings (don’t schedule a showing in the evening if you know there is a lot of traffic in front of your rental property), setting expectations, and making wise investment decisions (such as, improvements to your asset).
Desired Rent Price controls the population of people looking at your rental property. Prospective renters shop in ‘Price Zones.’ These are $1000-$1500, $1500-$2000, $2000-$2500, $2500-$3000 and $3000+. As you climb the ladder of prices, you cut the number of prospects looking at your rental property.
Desired Lease Term impels prospects to move forward, or to look at other options. People follow the laws of physics - a body at rest wants to stay at rest. If you are seeking a shorter lease term, it can be challenging to find individuals willing to comply with your request.
Scrutiny of Screening Process forbids certain individuals from living in your rental property. Of course, this is a good thing. You definitely do not want everyone living in your rental property. And, while you will save some time by implementing a cookie-cutter approach, you may also lose out on good tenants. Have back up processes for diving deeper into prospect’s situations. This will give a higher resolution picture of the worthiness for prospects who do not fit the mold.
Overall, a good goal is to have a property vacant for no more than a few weeks year. It is important to conduct a scope of work inspection at the property when you know it will be coming vacant. This renders an idea of the amount of work you will need to do. Remember, “It is easier and cheaper to keep a customer than to create a new once.” So, find out why your renter is moving and do the best you can to keep them. Otherwise, bear in mind the variables distinctive to your deal and execute your plan!