Among the things that landlords and property managers usually don't enjoy having is a vacancy in one of their rental properties.
Vacancies can have a detrimental impact on a property management business, so it is essential to know exactly what it is and how reduce it.
But, did you know that there are actually various forms of vacancies?
In this article, we will be discussing the ins and outs of vacancies, including the different types as well as how to reduce it.
To begin, let's go over what a vacancy is.
What Is A Vacancy?
A vacancy refers to an unoccupied unit or space in a rental property, such as an apartment complex or a commercial building.
A vacancy can occur for various reasons, such as a tenant moving out, a unit being temporarily unoccupied while undergoing renovations, or a unit not being rented out at all.
However, there are a few different kinds of vacancies that landlords and property managers should know about, which we will discuss below.
Different Types Of Vacancies
There are several types of vacancies that can occur in rental properties, including:
This is a vacancy that occurs when a tenant moves out at the end of their lease or decides to not renew their lease.
This type of vacancy occurs when a rental property is only occupied during certain times of the year, such as a vacation rental that is only occupied during the summer months.
This type of vacancy occurs unexpectedly, such as when a tenant moves out unexpectedly or a unit becomes uninhabitable due to damage.
This type of vacancy occurs when a unit is not able to be rented out due to structural issues or repairs that need to be made.
However, no matter the type of vacancy, landlords and property managers should always aim to have the least number of vacant units as possible.
If they do have a high vacancy rate, they can face detrimental consequences, which we will discuss in the next section.
Effects Of Having Too Many Vacancies
Having too many vacancies in a rental property can have negative impacts on the financial performance of the property.
When units are vacant, the property owner is not receiving rental income from those units, which can lead to a decrease in net operating income.
Additionally, having a high vacancy rate can also negatively impact the value of the property, as potential buyers or investors may view a high vacancy rate as a red flag.
So, in the past few sections, we have mentioned the term vacancy rates a few times, but what is that?
In the next section, we will discuss what a vacancy rate is and how to calculate it.
What Is The Vacancy Rate?
The vacancy rate refers to the percentage of units or spaces in a rental property that are currently unoccupied.
It is a key metric used to assess the financial performance of a rental property and is calculated by dividing the number of vacant units by the total number of units in the property and multiplying by 100.
But, what most landlords and real estate investors are concerned with is lowering the rental vacancy rate. Below, we will explain exactly how to do just that.
Lowering Vacancy Rates
There are several strategies that property owners and managers can use to lower the vacancy rate in their rental properties:
Price rentals appropriately
Setting rental rates that are too high can discourage potential tenants from renting, leading to a higher vacancy rate.
It's important to research the local rental market and set rental rates that are competitive but also generate a profit for the property owner.
Offering incentives, such as a discounted rent rate for the first few months or a waived application fee, can help attract potential tenants and lower the vacancy rate.
Market the property effectively
Marketing the property effectively can help attract potential tenants and lower the vacancy rate.
This can include using various marketing channels, such as online listings, social media, and networking with real estate agents.
Maintain the property
Keeping the property well-maintained can help attract potential tenants and lower the vacancy rate.
This can include making necessary repairs, keeping common areas clean and well-maintained, and providing prompt maintenance services to tenants.
If you are curious as to how to go about calculating vacancy rate, we will explain exactly how in the next section.
Calculating a Property's Vacancy Rate
Calculating the vacancy rate of a rental property is fairly straightforward. To calculate the vacancy rate, you will need to know the total number of units in the property and the number of units that are currently vacant.
To calculate the vacancy rate, divide the number of vacant units by the total number of units and multiply by 100 to get the percentage. For example, if a property has 20 units and 5 of them are currently vacant, the vacancy rate would be calculated as follows: (5 vacant units / 20 total units) x 100 = 25% vacancy rate.
It's important to regularly track the vacancy rate of a rental property to understand the financial performance of the property and identify any potential issues that may be impacting the occupancy rate. Monitoring the vacancy rate can also help property owners