While famous real estate investors online showcase the potential return behind a massive buy, renovation, appreciation, and sale of a property, that’s just a portion of real estate investment. The bread and butter of real estate investing behind the scenes come from rental properties. They offer a stable return on investment every month, providing cash flow and the liquid cash needed to make down-payments for future purchases.
However, despite the obvious advantages of having rental properties generate cash flow for you every month, they introduce a different risk – vacancy rates. These refer to the percentage of rental properties that go vacant, or in our case, are the downtimes when we have no tenants and the property is generating zero return.
Vacancy Downtimes Are Tough
In a perfect world, vacancy rates are relatively low, and you can guarantee that a rental property will always generate a stable income to help pay its monthly expenses like amortization, utilities, HOA fees, and the like. However, because the real estate market is subject to volatility and economic shocks, a real estate investor will inevitably meet certain droughts where tenants are nowhere to be found.
As a result, investors who’ve relied heavily on leverage to keep buying and buying, without recognizing the risk of instability in the market, are at greater risk of losing it all when facing a substantial vacancy downtime. So, to help prepare you for the worst-case scenario, here are some things you can do to decrease vacancy rates on your rental properties.
#1 Invest in Home Improvement
Homes aren’t made equal, and some require a lot more TLC than others do, and in the business of rental properties, you should know how important the fidelity and curb appeal of a home play in piquing interests and making tenants stay. As such, whenever you have the extra budget or see the need for reallocation of funds to renovation, don’t slack off on investing in home improvement.
- Repairs and Renovation: When you purchase a property to rent it out, it’s hard to find one that doesn’t need a couple of fixes and repairs. One good place to start is identifying areas of the house that have been severely damaged or outright dated. Likewise, when a previous tenant leaves, you’ll want to double-check on the place before reopening the property for rent.
- Forced Appreciation: Sometimes, a rental property’s features don’t meet up to most tenants’ standards, and in this case, you need to dabble in some forced appreciation. If possible, increasing the number of bedrooms or bathrooms can significantly improve the property’s value and make it more appealing to like-minded renters.
- Appropriate Furnishings: If your property is semi-furnished or fully-furnished, ensure that these appliances are in good condition and won’t give your tenant any headache. An annoying refrigerator is all it takes to make one tenant never look back on a rental, and you don’t want that to happen.
#2 Advertise More Efficiently
While preparing the rental property is one thing, marketing it online and traditionally plays a massive role in increasing the number of hits and driving attention. You can’t expect potential tenants to catch wind of your property by chance, a single post, or through word-of-mouth alone. You need to be proactive and advertise more efficiently.
- Words & Photos: Sure, you could be an excellent real estate investor with an eye for rental properties, but this does not translate into becoming a marketing professional. To do that, you need to make your rental property pop and catch attention, so don’t be afraid to hire a photographer and freelance writer to perfect your listing.
- Post Everywhere: Don’t stick to one place alone or just putting up a for rent sign. Go all out, and post everywhere. Try rental listing websites, Facebook marketplace, and even local groups to ensure that your post gets seen by the right people.
#3 Reward Existing Tenants
Finally, the best way to reduce vacancy rates is by making sure the good tenants currently staying don’t leave. Remember, the amount of time, effort, and money invested into a rental property will go to waste if you fail to screen a good tenant who will abide by your rules and stay for the long-term. So, don’t forget to reward existing tenants by being more lenient with increased rent and giving them a discount when times are rough.
A Stable Return
Overall, a rental property that doesn’t generate any income is a firm path to financial ruin, so if you want the best chances of staying on the road to financial success, do your part in reducing the risk of vacancy rates. Implement these changes into your investment plan, and feel free to share this advice with people who need to read it as well.