Minimizing Vacancy Time On Rental Properties

Vacancy is a landlord’s greatest fear. Whether your rental business is your primary source of income or just a side hustle, the health of your cash flow is dependent on rent payments from tenants. The average cost of tenant turnover today amounts to $2,500 per unit. Even one unit sitting vacant is an expense you can’t afford. 

Minimizing your vacancy rate can feel like an obstacle that can’t be defeated, but this is simply incorrect. There are a few key steps landlords can take to get their vacancies filled quickly and with tenants you’ll want to keep. To help you feel confident tackling this obstacle, we’ve put together 4 tips to minimize vacancy time on your rental properties. 

Key Terms: Occupancy and Vacancy Rates

In real estate terms, occupancy is the act of owning, renting, or taking possession of a unit. When a tenant moves into a new house, they are taking occupancy of that home.

On the other hand, vacancy occurs when a unit is unoccupied. The longer a rental property lies vacant, the more income the real estate investor loses out on. The term vacancy rate refers to the percentage of all available units in a rental property that are vacant or unoccupied at a particular time. It is expressed as a percentage and compares the amount of time a property could be rented to the amount of time a property was actually rented. 

Managing your vacancy rate can be a challenge, especially in real estate markets experiencing slow growth, out-migration, or employment loss. Here are our top four tips for keeping your units filled and vacancy rates low.

1. Be Prepared and Proactive 

When you know a unit is about to become vacant, don’t sit idly by and watch it happen. Being prepared and proactive can decrease or even eliminate vacancy. But what does it mean to be prepared and proactive as a real estate investor? Mostly, it’s just staying on top of tenant’s lease end-dates and acting before there’s a vacancy to worry about. 

When you know a tenant’s lease is about to end, reach out and discuss a renewal with them. It’s best to contact a tenant about 90 before their lease ends. If they’re considering leaving, you want to get to them before they settle on a new rental. 

You can even offer tenants incentives to make resigning a more attractive option. Incentives can include slightly lower rent, free pet rent, a gift card to a local business, or anything else you deem appropriate. If you offer the incentive as a reward for renewing within 30 days after you make the offer, you’ll know earlier whether or not you need to start looking for a replacement. 

Acting quickly will protect your rental income from the hazards of vacancy and limit the ratio of vacant to occupied units you have at any given time, known as your rental vacancy rate.

2. Maximize Marketing Efforts 

The best way to efficiently fill a vacancy is to market well and do it early. Thanks to the internet, there are more resources than ever to help real estate investors market vacancies and increase their occupancy rate. You just have to take initiative and capitalize on the resources available to you. 

Your primary marketing options include online listing sites, paid searches, and print ads. You don’t want to spend too much money on advertising, but the more renters you reach, the better chance you have of finding good tenants. 

In order to appeal to renters, you need to be sure your listings and marketing materials do two things: accurately describe the property and effectively grab applicants’ attention. 

There are plenty of tips and tricks for writing the perfect listing for a specific real estate market, but here are a few: 

• Highlight the property’s best features. 
• Be realistic about the drawbacks. 
• Include high-quality photos of the unit. 
• Do your best to use correct grammar and punctuation. 

3. Screen Applicants to Find Quality Tenants 

Your best bet to avoid vacancies and decrease your overall rental vacancy rates is to find long-term tenants. If they don’t leave, you’ll have no vacancies to fill. Not only that, you can rely on good tenants to pay on time, adhere to the terms of their leases, and respect your property and other tenants. 

Even if you’re in a hurry to fill rental units, you should avoid low-quality tenants and only sign the most qualified renters. To do this, you must perform thorough tenant screening. A rigorous screening process should include criminal, credit, and eviction history checks. 

In order to be sure you’re complying with Fair Housing laws, property owners should consider implementing a tenant scoring system (link to tenant scoring article). This way, you know you’re not liable to any lawsuits or claims, but you’re still only signing the most qualified tenants. 

4. Sell Partial Months 

Sometimes everything works out perfectly; your current tenant can move out on the end-date of their lease, and your new tenant is able to move in on day one, preserving your occupancy rates. Unfortunately, this isn’t always the case. 

Maybe the new tenant’s previous lease doesn’t end until a few weeks after you want them to move in. Or perhaps your current tenant needs an extra couple weeks to get their ducks in a row. Whatever the case, selling partial months reduces the amount of time that your unit sits vacant.  

When offering partial months to tenants, you must also offer prorated rent. The easiest, most flexible way of prorating rent for tenants is to charge by the day. To do this, simply divide their rent by 30. If your tenant pays $500 a month, they’ll pay $16.67 per day. You’ll charge them for each day they move in early or stay late. 

As with any change to the original lease agreement, you should update the contract accordingly. If you know in advance that a tenant will need to move in before the start of their lease, it’s best to include their adjusted move-in date and prorated rent in the lease. This way, you have paper trails of all agreements and financial transactions. 

Avoid Vacancy at all Costs

Collecting consistent rent payments from each of your units every month is absolutely necessary in order to maintain a successful real estate business — big or small. You should now be feeling confident in your ability to minimize vacancy time on your rental properties. Vacancy is simply an expense you can’t afford and is a obstacle to increasing your revenue.

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