There are the obvious costs to vacant rental properties: paying for the mortgage, insurance, taxes and utilities out of pocket. But the costs don’t end there. Break-ins, vandalism, landscaping, and upkeep are all additional risks and expenses, which all aggregate to a message that you already know — rental vacancies need to be slashed to an absolute minimum.
How is this accomplished? Here are eight things you can do to chop your rental vacancy rate, and keep each property performing well with a solid rental agreement.
Tip 1: Do Your Homework
Here’s something else you already know: not all neighborhoods are created equal. Some have higher vacancy rates than others, for reasons ranging from overdevelopment to urban decay, and you need to know a neighborhood’s trends BEFORE investing tens of thousands of your dollars in it. Talk to property management companies, appraisers, realtors and anyone else you can find who has their finger on the pulse of the neighborhood you’re considering.
Tip 2: Visibility & Location
All real estate investors — and the rest of the world, for that matter — know that location is by far the most important aspect of a property. But you need to consider visibility as part of the location equation, because properties that get more foot traffic and other visibility will get word out faster, and thus bring in the rental application signatures faster. Sure, internet advertising is great — for certain demographics — and newspaper advertising can be effective, but putting up a "For Rent" sign will reach people who already know the area and what the property looks like, from the outside anyway.
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Tip 3: Quick Turnaround on Repairs
Every day between when a rental property is vacated and a new rental agreement is signed is money lost for the landlord, so get your handyman or contractor in the property on Day 1 to touch up paint, do any overdue repairs and generally put the property in a fit shape to show. This means maintaining relationships with contractors, and staying in communication with them. This is also a great time to get an edge on your competition by improving your property, as your tenants will only be as good as your rental property.
Tip 4: Price Right
Don’t guess what you should charge for rent, because an inappropriate rental amount will either shortchange you or the property will never rent. Look up what other landlords are charging in the area, and maybe even go walk through a few of these properties to see how they compare to yours. Price it right — get it rented — and you’ll save yourself a lot of headaches.
Tip 5: Market Your House Appropriately
Who are you trying to reach? If it’s an Hispanic neighborhood, maybe you need to advertise in Spanish in the local Spanish newspaper. Many landlords use computers every day — and assume the rest of the world does too — but many lower-end rental applicants don’t use the internet at all, so remember that the internet may not reach your target audience. The bottom line is to make sure you reach the right people, so think in terms of what will reach into their lives — not what’s effective in yours.
Tip 6: On Site = On Task
Sure, your little townhouse for rent isn’t going to have on-site property management — but if you own an apartment building — it may make sense to hire an on-site property management company. On-site property managers statistically have shorter rental vacancies — so if reasonable to do so — hire on-site property management to get that rental agreement signed faster.
Tip 7: Rental Agreement Term
Obviously, a longer term on your rental agreement means fewer vacancies (theoretically, anyway), which means you want the longest term possible. Yes, we live in a world perpetually afraid of commitment — so you’ll have to offer something in return to draw quality rental applications. Consider offering your prospective tenants a choice between a one-year rental agreement at one price, and a two-year rental agreement with a $50 discount every month — or maybe you’ll kick in paying for the water bill. The point is that it can be worthwhile to bribe tenants to commit to a longer rental agreement term.
Tip 8: The Rental Agreement with Purchase Option
There are several advantages to advertising rent-to-own — including tenants who are more invested in taking care of the property. In addition they have more incentive to pay rent on time, and then there is the possibility of attracting higher-quality homeowner-material tenants. It also saves you the cost of a realtor fees.
So start printing rental application forms — start advertising — and take a smarter approach to scoring a signature at the bottom of that rental agreement.