Here are my seven strategies to help increase your return on investment on keeper properties by reducing vacancy.
Location, Location, Location… Search out the areas that have low vacancy rates. Talk to local realtors, property managers, and seasoned investors who have been renting units for over a decade before you take the plunge and buy a property.
For example, I want to own property where supply of rental properties is low and the demand is high. I own properties in a town where the schools are in the Top 50 Schools in America. Demand for rental property is high and my average days on market to rent are usually less than 2 weeks.
It is important to have the competitive edge in rent for tenants. Look at the other rentals in the MLS and on various rental sites (www.rentals.com, www.rent.com, and www.forrent.com). If you offer a good price compared to the competing properties, it will rent faster than the other properties.
All tenants want to live in a really nice home and when they are happy there, they don’t move. I had a tenant in Connecticut that loved their kitchen and bath in my rental property and lived there for 12 ½ years! The house was in such great condition when I rented it to her that I never stepped foot into the house during the entire time that she rented from me.
This is why I usually don’t raise the rents on my tenants at the end of the first year when the lease expires. I usually offer a 2 years lease with no rental increase as long as the tenants pay on time every month. The longer the tenant stays in the house, the deeper their roots go into the neighborhood and community. The worry of costly vacancy will be avoided for more than 24 months.
When a tenant calls about a clogged toilet, air conditioning that is not cooling, or any other malfunction, then the landlord or property manager should respond quickly. Remember that unhappy tenants move. Move outs are extremely costly for property owners. I have some properties that are over $2,000 per month. Those vacancies hurt your profit margins greatly! I like to have the maintenance person on site less than 24 hours for all minor issues.
Start advertising before the tenant vacates so you have multiple new prospective renters ready and excited to look at the upcoming property. I want to do a walk-through 2-3 weeks before the tenants move out so I can have all the handymen and contractors lined up to do the necessary repairs the minute the tenant moves out of the property! Every day that the property is vacant, you are losing money!
This option will attract high caliber Rent to Own tenants who are looking to test drive a property prior to committing to home ownership. In the Rent to Own situation, the tenant gets time to get accustomed to the neighborhood, schools, and surrounding areas without being rushed to buy a property. They will be more likely to pay their rent in a timely manner to avoid losing their right to buy. This strategy can also save the 6% in realtor commissions. If the property is in an area that is appreciating rapidly, be careful not to set the option price too low because you want to get all the appreciation as the prices in the neighborhood climb upward.