Using an incorrect rental vacancy rate can result in major mistakes in your property revenue forecasts. Keep on reading to learn the best tips.
Rental vacancy is a real headache for any real estate investor. Ideally, you will want 100% occupancy rate for your rental property. Realistically, it will not always be the case. Most real estate investments cannot afford the costs of rental vacancies.
Table of Contents
- What Is the Current Rental Vacancy Rate by City in the US?
- Tip #1: Know the Market
- Tip #2: Advertise, Market, Promote, and Sell
- Tip #3: Be Alert
- Tip #4: Keep Your Property Clean and Homey
- Tip #5: Offer Incentives and Rewards
- Tip #6: Be Nice
- Tip #7: Consider Listing Your Property With A Realtor/Broker
Whether you are paying your mortgage or simply need a monthly rental income, a high rental rate will put you at financial risk.
Now, if you experience high rental vacancy rates or if you want to avoid rental vacancy, read the following seven tips provided by Mashvisor.
What Is the Current Rental Vacancy Rate by City in the US?
The national rental vacancy rate was continuously declining for most of the last decade. According to FRED, the rental vacancy rate in 2021 (quarterly) was:
- Q1 2021: 6.8%
- Q2 2021: 6.2%
- Q3 2021: 5.8%
- Q4 2021: 5.6%
Additionally, the rental vacancy rate in the current year is:
- Q1 2022: 5.8%
- Q2 2022: 5.6%
- Q3 2022: 6.0%
From the above data, we can see that the vacancy rate was the lowest in the Q2 of the current year. However, with Q3 being at 6.0%, we can see that the figure is rising, and it may continue into Q4 as well.
Unfortunately, high vacancy rates suggest that a unit is not renting well, but low vacancy rates can imply that rental sales are high. Nevertheless, IPropertyManagement statistics show that the suburban rental market is expanding and that people are returning to cities.
- In 2021, the national rental vacancy rate fell by 13.8%.
- There are 23.3% of unoccupied homes for rent.
- In the third quarter of 2022, the median monthly rental cost among vacancies was $1,334, which is expected to rise to $2,090.
- Zero (0) large urban rental markets are in hypervacancy as of Q3 2022.
With the above statistics in mind, now let’s focus on how to calculate vacancy rate and avoid it being high.
Tip #1: Know the Market
The vacancy rate in real estate most commonly represents homes that are unoccupied and ready to be leased. They also include units that were delisted due to a tenant’s departure and units that are not immediately rentable due to maintenance or renovations.
If you have not already, research the market. You should be able to find out what the range rent is. Make sure to ask around. What are other landlords charging?
Do not charge rents above the market price; tenants will know if you are overpricing your property. At the same time, do not underprice. Otherwise, possible tenants might start wondering why your property is cheap. Make sure it is priced just within the market range.
Researching the market also includes pursuing possible tenants, preferably long term ones. Keeping your rental vacancy rates low means you should always be on the lookout for potential tenants. Stay well connected in your local real estate market. Be the first option someone considers when they’re looking to rent a property.
In addition to this topic, let’s see how Mashvisor can help in this particular scenario.
Calculating a Property’s Vacancy Rate Using Mashvisor
The percentage of the number of days a rental property not being occupied by a tenant versus the number of days it is available for rent is the vacancy rate. Some examples are vacant or unoccupied properties, such as apartment complexes, during a specific time.
Vacancy rates typically differ from market to market and, in some cases, neighborhood to neighborhood.
A high average vacancy rate usually indicates that the neighborhood is undesirable to tenants or that there is an oversupply of rental homes. In contrast, if the region has a low (good) average vacancy rate, there are likely to be a lot of possible renters.
Therefore, even after you’ve identified a good rental market, you should investigate the occupancy rates of rental homes for sale. Mashvisor’s vacancy rate assessment can ensure that you purchase a rental property with a low vacancy rate.
Also, Mashvisor enables you to easily predict vacancy rates in the US housing market by offering trustworthy occupancy rate data for property markets and investment properties. It is achieved via the platform’s vacancy rate calculator.
If you wish to explore the calculator yourself, start with a 7-day free trial.
Mashvisor’s calculator estimates the rental occupancy rate of a listing depending on what type of rental it becomes.
Tip #2: Advertise, Market, Promote, and Sell
Promote your property by highlighting its special features. What is the location like? Are there any shops, restaurants, and decent schools nearby? Differentiation is key; how do you set yourself from other properties in the neighborhood? Why should potential renters choose you instead of the next one?
When it comes to marketing your property, you can either go traditional or use modern-day approaches. Today, marketing a property traditionally is still widely used. Techniques such as putting a sign up in your yard or window are intended to attract local passersby.
More traditional techniques, such as word of mouth, are highly effective. You may use referrals from tenants, friends, family, other landlords, and fellow investors. If you have a vacancy, make sure all of your social and business circles know about it. Even if they themselves are not looking to rent a property, they may refer you to someone they know.
Today, many landlords are going online. List your property on Craigslist, Zillow, Trulia, and Hotpads. Use social media; things as simple as posting a status update on Facebook or sending out a tweet (via Twitter) can open up an opportunity for you.
You may also want to consider scheduling an open house event. Make it easy for possible tenants to access your property and see it for themselves.
Moreover, show prospective tenants why your home is the best in the rental market and why they should live there (take good photos of the property and add a suitable description).
Tip #3: Be Alert
As soon as your current tenant gives you notice that they are moving out, start looking for new tenants right away. Start advertising your property immediately and show it to possible tenants. Remember that you have the right to show the property to possible tenants as long as you give notice.
If you have successfully marketed the property, you should start receiving calls and emails. Answer all inquiries promptly and communicate well. If you do not, another landlord might, and you could lose out on a potentially lucrative opportunity.
Tip #4: Keep Your Property Clean and Homey
It is a no-brainer that tenants expect a decent property to live in. Make sure that your property is clean to give a good impression.
To reduce vacancy, you should constantly make a good first impression on potential tenants. Aside from ensuring that your home is in good working order, make sure to clean up the exterior with landscaping, regular repainting, tree and bush pruning, and so on. It will help you in attracting and retaining tenants.
If you are showing the property to possible new tenants, and you already have someone occupying the property, kindly ask your current tenants to make it look nice for the show.
Curb appeal is also very important. Your exterior should be an extension of what is on the inside. After all, it is what possible tenants see first. Make sure to keep it attractive and well-kept.
If you have a front yard, make sure it looks neat and lovely. If you are renting out a property in a building complex, check that the entrance is clean and welcoming. Keeping your exterior appealing will market the property for you.
Tip #5: Offer Incentives and Rewards
Offering some form of reward to stay is a terrific method to keep rent-paying tenants. For example, you can offer a lower one-month rent if they sign another contract. It will make them feel valued, and they are more inclined to stay.
Therefore, try to avoid raising the rent unless you need to, and think about offering paid utilities. Small numbers may make big differences for tenants. The more you offer, the less likely they will look for better deals and move out, and the more likely you will keep your rental vacancy rates low.
If your current tenant is moving out, you can offer them a hundred or a few hundred dollars reward if they refer you to other tenants.
Also, welcome new renters with a basket full of fresh fruit, cookies, or something else. Leave them a welcome note always, and remember small details about them. That way, you can easily reach out to them and leave a gift of appreciation when you think it is the right time.
Tip #6: Be Nice
The above tip is the simplest one on the list, yet one of the most effective. Get to know your tenants and show them you care. Be timely with appointments, running repairs, and providing help in general. Do not be the landlord who always happens to be always present. Make sure to give the tenant some space.
Take note that you do not need to be the tenant’s friend, but you do need to be friendly. The more pleasant and accommodating you are, the less likely you will dispute with the tenants. The more likely your tenants will stick around.
Simply being nice will give tenants one less reason to consider moving out.
Moreover, keeping your tenants satisfied by reacting fast to repair requests and other concerns is one of the simplest methods to maintain your vacancy rate low. Whenever possible, address any issues that may make your renters uncomfortable or constitute a health or safety risk as soon as possible.
Tenants are more likely to leave if they can’t reach you or need to wait too long for a serious matter to be addressed. Maintain open lines of contact with your tenants in order to win their confidence and trust.
Tip #7: Consider Listing Your Property With a Realtor/Broker
To remain competitive, you must examine the current rental rates for comparable homes in your local market (rental comps). If you charge a high rent compared to what your competitors charge, you will most likely have a vacant property. Therefore, offer a greater bargain to your tenants than your competition.
Now, maybe you are feeling lazy and feel like it is a lot of work. If that is the case, feel free to register your property with a realtor and get them to do most of the work.
While expensive, getting a realtor can bring you the right exposure and save you the hassle of doing everything yourself. It’s a proven and successful way to keep your rental vacancy rates low. Is it worth it? That is up to you to decide.
Bonus tip: Tenant selection should be strict about keeping turnover low. Getting high-income, steady, and trustworthy tenants will simplify your job as a landlord and keep your vacancy rate low.
Conclusion
Landlords can reduce rental vacancy rate in a variety of ways, and this article comprising seven tips is not an entire list. We’ve just given you a few important things to get started. Moreover, other methods may be required depending on your specific circumstances.
Now, understanding how to determine vacancy rate is a critical component of real estate investment analysis. Indeed, it is among the few predictive analytics that provides an accurate forecast of an investment’s success.
In addition to the rental vacancy rate, you may examine investment properties using various Mashvisor tools. The rental property calculator is an excellent example for this scenario, but you can also explore the platform’s Property Finder, Property Analysis, Valuation Analysis, Heatmap, among others.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.