One of the biggest mistakes that new rental property investors make is to underestimate their vacancy rate. This is the amount of time that your property will sit empty. A high vacancy rate can have a negative impact on your cash flow, net operating income, the total return on your investment, and cap rate.
The key to making your rental property a financial success is to keep your vacancy rate low. Consider these factors when determining if your rental property vacancies are costing you too much.
Mortgage
Just because the property is vacant doesn't mean your expenses stop. The biggest expense you’ll have is your monthly mortgage payment. If you don’t pay cash in full for your rental property, then you’ll have a monthly mortgage payment that you must continue to pay.
Utilities
Thankfully, the bill for the monthly utilities should be low if your property is vacant. However, if you anticipate the property being vacant for a while, then consider having the utilities turned off. This does present a certain amount of risk. Freezing temperatures can cause burst pipes if there’s no heat or hot water in the home.
Insurance
You will still pay for insurance coverage on your rental property. This includes coverage for liability, flood, and hazards. You cannot let your insurance coverage lapse simply because the property is vacant.
Marketing
It can be worthwhile to pay for marketing and online listings. Your property can gain more exposure, and you can secure a tenant faster. However, you’ll want to list your vacant property with the right online resource.
While online property listing websites and property aggregators can offer the potential for broad exposure, this isn’t always the best option. You’re paying money to reach a large audience that may not be interested in your property. A better option is to focus your marketing efforts on your target market. This gives you a better return on your listing investment.
Working With a Real Estate Agent
Some real estate agents are willing to help you place a tenant in your vacant rental property. However, they will take a commission from the arrangement. This will cut into your profits and reduce the financial return you could have.
Additionally, not all real estate agents have experience with rentals. These agents may agree to work with you, but they won’t have the knowledge base or experience necessary to place a high-quality tenant. This can cost you more, in the long run, should the tenant not pay their rent on time, or you need to evict them.
Working With a Property Manager
A property manager is not the same as a real estate agent. Working with a property manager can afford you more benefits than just securing a tenant for your rental property. This can reduce your overall listing costs. A property manager will have a better understanding of how to attract and choose the most desirable tenants.
Many will arrange for applicant screening and include this in your overall cost. This streamlines the process and ultimately makes it more affordable. Once the tenant is in place, your property manager will continue to maintain and manage the rental, further reducing your long-term costs.
Listing Your Property Yourself
The most affordable option can seem like doing the work yourself to list your vacant rental property. However, you need to factor in your time and effort. It can be time-consuming to create and manage multiple listings. You’ll then need to check each website for communications from potential applicants.
Once you have applicants, you’ll need to pay for background and credit checks. Then it’s up to you to choose a quality applicant to be a tenant. Once they are moved in, you’ll continue to manage the property independently, taking up more of your time and energy.
Get More Value With Your Listings
It’s time to get more value with your listings. Having a vacant property costs you more than just losing out on the monthly rental income. To ensure you reduce your vacant property costs, optimize your vacant property listings by working with an experienced and knowledgeable property manager.
Contact our skilled team today and let us help you reduce your vacancy listing costs.
