Vacancies present quite a challenge to Real Estate investors.
And in spite of your best efforts, vacancy is inevitable. No matter how good of a Landlord you are, Tenants are eventually going to move. And when they do, it's critical to minimize that vacancy as much as possible.
Tenant turnover is a big expense for many Landlords in the first place. And if you can't get the property re-rented in a reasonable amount of time, lost rents, cleaning costs, maintenance and advertising will compound the Vacancy Effect.
In a previous blog we discussed ways to increase Tenant retention, and today we are going to share some ways you can reduce down time between Tenants.
Here are a 5 tips to help keep your vacancy period as short as possible:
1. Know your market - As you can imagine, one of the biggest reasons properties suffer from prolonged vacancy is because the price isn’t right.
This is simply an issue of understanding the current market and what your property is actually worth, not what you want it to be worth. Or, what some proforma you created a few years ago indicates what the rent should be for a particular year.
The reality is that every home, unless it suffers from major defects, should rent relatively quickly if it's priced right.
How much you should charge for your Indianapolis rental property can be determined by running a comparable market analysis and determining what other, similar properties are renting for.
You also need to keep in mind that setting a rent rate is not a one and done deal. You need to keep up on current trends as they will change and you will need to adjust your price point accordingly. Typically, you’ll want to reevaluate your investments and the market at the end of each lease to determine what your next rent rate should be.
2. Optimize your marketing strategy - If you aren’t using an Indianapolis Property Management company to oversee your investments, then it’s up to you to ensure your properties are visible. No one can rent it if they don’t know it exists.
If you’re seeing a lull in rental activity, it may be time to re-visit your marketing strategy.
Here are a few marketing tips:
- Utilize free, online listings: Sites like Zillow, Hotpads, Homes.com, and Craigslist are great channels to advertise your properties on. They're wildly popular with Renters and get a ton of traffic.
- Online Newspaper Ads: While these types of listings have declined in popularity, it's still a viable option. Many local markets have their own classifieds so it can be a great way to target people in certain neighborhoods.
- Put up For Rent Signs: There is debate on whether or not using for rent signs is really the best idea, but there are some benefits if you determine you want to utilize this method.
- Advertise on Social Media: With the emergence of new technology, social media has become a dominant player in the advertising world. Facebook is particularly powerful as it offers its own Marketplace and specific groups that you can join and advertise in.
Best of all - it's free!
- Use High Quality Photos: First impressions matter and the photos you post are going to be the first thing a potential applicant sees. They will make a decision then and there whether or not they want to pursue it any further.
It's worth the extra time and effort to ensure your pictures are crisp and in an order that makes sense. Also - take a lot of photos. The more photos you have, the better.
- Write Unique and Engaging Descriptions: Similar to the photos, the description will be the Renters first taste of the property. You want to create an appealing image in their mind and help them visualize the home and entice them to want to see it in person.
- Respond to Every Lead Promptly: This is likely the biggest key in effective marketing. Finding a Tenant is kind of like fishing. Once you get one on the hook, you can't just sit there, you have to reel it in or it'll take your bait and get away.
Once a potential applicant shows interest, you need to respond immediately. Don't give them the chance to look for another property.
2. Allow pets - If you’re experiencing a relatively long period of vacancy and you have a No Pet policy, this is a very easy adjustment you can make. Allowing pets opens up your property to a much larger market, puts more money in your pocket, and keeps your Tenants happier.
Industry statistics show that a whopping 68% of households own pets. If you have a No Pet policy, you are eliminating an enormous segment of your target market.
In addition, a report from FIREPAW, Inc., showed that Tenants with pets are more likely to stay in a rental property longer (23 months) than Tenants without pets (15 months). This means fewer turnovers which translates to less vacancy.
Of course, there is always some risk of pet damage, but we feel that the pros of allowing pets in your rental property far outweigh the cons.
3. Hire a Property Manager - I'm not just saying this because I own a Property Management company. Most Investors don't enjoy the process of finding and managing Tenants and unless you have a LOT of time, resources, and effort to dedicate to leasing your property, a Property Manager will always be able to get it done more efficiently.
After all, it's our job.
Unless you're a full time Landlord, it's tough to keep up with the demands of getting a property rented. Even if you are, it's not ideal to have to give up your evenings and weekends to conduct showings.
A good PM can offer a lot of value to you as a property Owner. They will be able to market your property on numerous channels (including ones you don't have access to) conduct showings, respond to leads, screen applicants, and manage the day-to-day details once the Tenant is placed.
If the idea of turning your entire investment over to a third party doesn't appeal to you, a Leasing-Only option may be up your alley.
Basically, a Leasing-Only option would entail a Property Management company finding and placing your Tenant for a one time fee, and then handing the property back over to you to self-manage once the lease is signed.
4. Understand Seasonality- Seasonality plays a BIG role in the Indianapolis rental market. If you plan to invest here, this is something you'll need to keep in mind at all times.
The time of year that you place your home on the market will be a factor in vacancy time and will also affect the amount you can charge for your rental.
We typically see a significant dip in the market every fourth quarter which can be seen in our Rental Statistics Reports.
You'll also want to try to align your leases with the seasons as well. For example, if a Tenant signs a 12-month lease in July, that leaves you in a good part of the year to get it rented again. However, if a Tenant signs a 6-month lease in July, that puts the end date in January which is not an ideal time to market a home.
For some odd reason, most Renters don't like moving in sub-zero temperatures.
So, to quickly recap, vacancy is a cash flow killer and should be avoided at all costs. Hopefully these tips will be helpful in getting your property rented as fast as possible and will continually reduce your vacancy rates.
We'd love to hear your thoughts on this issue.
What vacancy reduction tactics have worked for you? Comment below!
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