Reducing Vacancies and Increasing Tenant Retention
Many investors would agree that vacancies can be the kiss of death. When you receive a call from your Property Manager, it usually means money will be pulled out of your pocket soon. Often times it involves a 30 day notice. This leads to immediately putting the property on the market, and hope your current tenant will cooperate with with your Property Management company to begin showing the property immediately. At that point your thinking
Choosing the right price: Don’t get price greedy! Your initial price may have a bearing on length of your initial vacancy, as well as the length of your tenant occupancy. If priced too high, your unit is likely to be vacant longer, and when finally rented, your tenants may elect to move at the end of the lease, if they feel they have better options of amenities and/or pricing in similar properties.
VACANCIES- the kiss of death! $100/mo. price reduction may increase the number of applications thus; reduce the length of any vacancy.
Remember, you can always increase rents later (after initial term is expired). Slow, regular increases are optimal.
The Economy has caused an increase in vacancies and an increase in the number of occupants in each unit. Fewer families are moving do to the cost.
Rent Increase- Weigh the risks of a rent increase. On a property with a $1,200/mo. rent, an increase of $100/m. would be eaten-up with just one month of vacancy. Would the increase cause a good tenant to consider leaving?
Do we anticipate rents going up or down over the next year? We don’t know. But sometimes taking less now will result in more over the long-haul. By getting a good tenant into a 1 year lease now, you are protecting your profit over the next 12 months and then if rents go up after the initial lease, you can consider an increase at that time.
Be careful with too many restrictions!- Restrictions are easy to enforce in a strong Rental market, when there are lots of applicants. However, in a softer market it may significantly decrease to number of applications you receive or can approve. Consider allowing Section 8 applicant, Pets, etc. The Section 8 process is a lot of work for the Property Manager and can take a little extra time, but may benefit you by shortening your vacancy.
Long-term thinking should be used when setting monthly rents and restrictions. This information is provided in an effort to help you make informed decisions and increase the bottom-line performance of your Investment.