Hoping for the best and expecting the worst is not just a philosophical outlook. It also applies to business—being prepared for times when cash flow might be negatively impacted. In the rental industry, this can be prompted by vacancies.
Even after doing your due diligence, the rental market is too volatile to guarantee consistent rental income. With that said, a good rental property owner must be prepared for it. Good property management is the key to reducing risks, as well as taking advantage of the situation, and here's how.
Key Highlights:
- Vacancies can significantly impact rental income, so landlords should prepare in advance with cash reserves, strong property management practices, and proactive planning.
- Tenant screening and relationship-building are crucial for reducing vacancy rates. Clear communication, regular maintenance, and prompt responses encourage long-term tenancies.
- Vacancy periods present opportunities for rental market research, lease agreement adjustments, and property renovations to increase appeal and value.
- Preventing vacancies starts with retention strategies such as flexible lease terms, curb appeal improvements, and incentives for lease renewals.
- Efficient property management, whether in-house or outsourced, ensures smooth operations, better tenant satisfaction, and reduced downtime between tenants.
Proactive Planning
Cash Reserves
Many real estate investors and property managers would advise you to have cash reserves for a rainy day. You can set aside a percentage of the gross rent each month, however much you want.
Typically, landlords save between 15% and 30%, although that may depend on the property's condition, location, market demand, and type. Consider the administrative costs you need to cover while finding a new tenant to maintain a steady rental income.
Tenant Screening
After finding prospective tenants, you must conduct the necessary tenant screening process to find qualified tenants and minimize vacancy periods. You can screen tenants using comprehensive criteria, covering credit scores, criminal history, rental history, employment verification, calls to previous landlords, and more.
Positive Landlord-Tenant Relationships
Fostering a strong relationship with your tenants and providing clear tenant communication channels is one of the basic tenant retention strategies you can use to reduce rental vacancy rates. You can do this through regular maintenance, collecting rent efficiently, and responding to maintenance requests from your existing tenants.
During Vacancy Periods
Rental Market Research
You can conduct rental market research while considering factors like rental demand, similar properties, tenant interest, and more. With the crucial information you gather, you can adjust aspects like rental price, marketing strategies, and desirable amenities to add.
Lease Agreement Review
You will have the time to look through your lease agreement as you market your vacant properties. Think about the changes you can make, such as flexible lease terms to attract quality tenants. More importantly, tackle aspects of the lease agreement that prompted tenants to leave, and whether you can do something about it.
Renovations
The silver lining during vacancy periods is that you don't have to worry about upgrading occupied rental units and increasing property value. It's a struggle to find the opportunity to make rental property upgrades, especially when you have long-term tenants, so make the most out of the vacant unit before finding prospective tenants.
Tenant Retention Strategies
Rental property vacancies are better avoided because of the costs and losses when an existing tenant moves. It's not just the tenant turnover costs, but the longer a rental unit stays vacant, the more your rental income will be affected. Here are ways you can prevent property vacancies.
1. Regular Property Maintenance
Regular property inspections and maintenance help your rental business in more ways than one. Not only will you boost tenant satisfaction, but also delay property deterioration. It keeps all systems and functions in good condition, and you will find issues early enough to reduce potential maintenance costs.
2. Flexible Lease Terms
One of the reasons behind rental vacancy is the lack of adjustment in lease terms. Some tenants want more lease renewal options. If you have month-to-month leases, for instance, you can offer longer fixed-term leases for a lower rental price. You'll have more long-term, satisfied tenants and minimize vacancy periods.
3. Curb Appeal Improvement
It will be much easier to find prospective renters when you have an eye-catching rental property. Improving curb appeal will help you attract potential tenants through online listings, as well as retain tenants. Do consider tenant preferences, given that they're the ones paying you to rent the property.
4. Efficient Property Management
Property maintenance is an important task, but there are other property management responsibilities that need to be done correctly, such as consistent rent collection, tenant screening, maintenance coordination, and so on.
If it's too overwhelming for you, there are professional property management services that can help you make your operations smoother, or property management software that can streamline certain tasks.
5. Offer Lease Renewal Incentives
Offering incentives for lease renewals will encourage more tenants to stay in your rental and reduce vacancy rates. The incentives can be discounted rental rates, access to certain amenities, or even exceptions to restrictions.
Rental Property FAQs
How long does it usually take to fill a rental property?
- It varies depending on location, market demand, pricing, and property condition, but in San Diego, the average is 30–60 days.
What’s the biggest cause of long vacancy periods?
- Overpricing the rent, poor marketing, or having an unattractive/poorly maintained property are the most common reasons.
How can I reduce my vacancy rate?
- Price competitively based on comparable properties, use high-quality listing photos, advertise across multiple platforms, find reliable tenants, and keep the unit in excellent condition.
Should I hire a property manager to reduce vacancies?
- If you don’t have time or experience marketing rentals, a professional property manager can help fill vacancies faster and ensure tenant satisfaction.
Can I charge a higher rent if I upgrade the unit during a vacancy?
- Yes, but make sure upgrades match what tenants in your market are willing to pay for. Potential tenants will often opt for the cheaper rentals if the more expensive choice is only slightly better.
Leave Your Investment in Good Hands
There are plenty of reasons to hire a property manager—streamlined operations, reduced stress, and passive income, all of which benefit investment property owners like you. Here at Income Property Advisors, our goals are always aligned with yours, which is maximizing your rental property's profitability.
Let our property management company take care of you, your tenants, and your rental property, and focus on other ventures. Contact us today to get started!
