Where Did All My Income Go?
Top Tips to Fill Your Vacancies
Tamara Simon | Rental Property Guru
Nothing eats up your cash flow like a vacancy. When there is a vacancy it is a challenging time for a landlord. Your investment property is producing NO INCOME and you are looking to start a new relationship. Every prospective tenant represents hope and fear for you. Is this the person that will give your property the TLC it deserves and pay their rent on time or is this person going to make your life a living hell?
This is also a stressful time for prospective tenants. They too are looking to start a new relationship and find their new home. Good tenants want to work with good landlords, someone they can count on to respond to repairs promptly, solve problems with the neighbors as they arise, and treat them in a fair and respectful manner. You are not just marketing the property to prospective tenants you are also marketing your services as a landlord. Stand out from the average landlord. Prepare to market like a professional, create cash flow and crush your competition.
Prepare
Can you show your property before your current tenant vacates? This is the ideal scenario. You show the property before the vacancy, sign a lease and have a 24 hour turn around for cleaning and your new tenant moves in. The truth is this rarely happens. Your current tenant may be a very casual housekeeper, pets may be a problem, and your current tenant may not be cooperative for showings. The bottom line is the property will not show at its best. You want to be able to show a property in its best condition. You do not need granite counter tops and top of the line appliances. What every prospective tenant is looking for is a move in ready (think brand new condition) property. Have the property professionally cleaned. Your lease may provide a clause where the cost of cleaning and carpet cleaning will be paid for by the departing tenant.
What you can do is be prepared to market the property as soon as possible. The day your tenant vacates have your vendors ready. Cleaners, carpet cleaners, painters, have them lined up to work at your property. Most move outs happen at the end of the month and you’re not the only landlord that wants vendors at the property the first day of the month. Schedule vendors in advance so you are not waiting weeks to get work done before you can show the property. As soon as your tenant gives you their notice to vacate, schedule a time to view the property if you have not been in the property for six months or more. You will have a better idea of what needs to be done to prepare the property for your next tenant. There will always be surprises on moving day, you never really know until the property is vacant what damage is hidden under or behind furniture. With a pre inspection you won’t be ambushed by lots of major problems that will delay your plans to show and turn over the property as soon as possible.
When you do have a tenant that has the property looking like they are waiting for the photographers from Better Homes & Gardens to arrive for a photo shoot (this does happen; some people have a knack for decorating ) and the tenant is very cooperative you can show the property before that tenant vacates. These are gold standard tenants. Silver standard tenants have the property in very good condition and nice furniture with very little clutter around. Most people have too much clutter (family photos, toys, etc.) out and it makes it hard for a prospective tenant to see themselves living there. You may want to show the property with a silver standard tenant before they vacate. Any time the conditions are below gold or silver it is better to wait to show the property when it is vacant and cleaned. When the property is not clean, has a bad odor, or is occupied by problem tenants just wait to show the property — save yourself grief and time. To attract quality tenants offer a quality product.
Now is also a good time to check on utility bills that are in the tenant’s name. Is the tenant current on their bills or so far behind in payments they are facing a shut off? Even when the tenant is current with payments, make sure your tenant is only requesting a closing bill and not shut off service. It is frustrating to be at the property to start work and find the water, heat or electric shut off and then spend days working with the utility company to get them back at the property to start service.
Marketing
The majority of prospective tenants are searching online for their new home. You need to post your ad to sites where they can find your property. Zillow came on the scene in 2006 and changed the way landlords advertise a property, and in the process took away a huge revenue source for newspapers. There are times you may still want to consider newspaper ads. Some neighborhood papers do have a well-read following and it may be worthwhile to post your vacancy with them. The newspapers loss was a win for landlords, Zillow lets you post your ads with photos for FREE. Zillow also owns other sites including Trulia and will populate these other sites when you post on Zillow. Craigslist is not owned by Zillow, so you need to post a separate ad to appear on Craigslist. Create an ad that inspires prospective tenants to call you. Most landlords just post the same basic ad copy; you want to do better and stand out from your competition. Create a headline with a compelling story about the property and the neighborhood. Then you can list all the features. Make sure you have great photos, and post at least 6 photos. Zillow has studies that show ads with photos get viewed more often than ads with no or just a few photos. Refresh your ad as often as that site will allow. You can also create a website featuring your property and all the services you offer as a landlord, this is especially worthwhile for apartment buildings or small multifamily properties. Word of mouth is great advertising, let your friends and all the people in your sphere of influence (the average person has 150 people in their sphere) know about your vacancy via Facebook. There are also Facebook groups just for a specific neighborhood, condo association or HOA use these resources that are FREE make the most of this opportunity.
If you are using photos that show your current tenants possessions make sure you have their written permission to post these photos online. Even when your tenant gives you permission to use photos pay attention to what is in the room. People leave jewelry (or jewelry boxes) , expensive high end multimedia equipment, or other items that can attract a thief. Ask your tenant to put these items away for the photo whenever possible. Make sure your tenants car is not in the exterior photo of the property.
Research Market Rent
No matter how spectacular you ad is and how stunning your property looks if you are overpriced the property will sit vacant. You need to do your research to identify the correct rental price. First start with Zillow, but this is where 95% of your prospective tenants are looking. When I show a property it is amazing how many times prospective tenants want to challenge me on the rental price because the Zillow estimated rent is lower. Be prepared with your research to justify your price. Look online at other sites including Craigslist to see what is being offered within a one or two mile radius of your property. Then go visit at least 4 of your competitor’s properties. There is nothing like boots on the ground to really compare market rent. Does your property offer gas heat, ample parking, well cared for homes or multi-family property next door? Is the neighbor’s dog barking the entire time you are viewing a property or is there a lingering bad odor that greets you the minute you enter the property? Pay attention to all the details large and small that do not come across in an ad. This is also a great time to make a connection with a fellow landlord. Tell them that when you are showing your property if the prospective tenant is not interested in your property, you will gladly refer that person to their vacancy. Your fellow landlord will now offer to do the same for you, a win win situation for both of you.
Use the free online service from Rentometer. This site compares rental comps within a mile radius of your property. Property management companies can be a good source of information for you also. You need to know the vacancy rate in your neighborhood. Not the vacancy rate in your city, I really mean the area within 3 miles of your property. The overall vacancy rate in Seattle may be 5% but in your neighborhood the vacancy rate may be 2%. This is important to know. Rental property is a business of supply and demand. When demand is high and supply is low rental prices go up. Keep in mind you need to use all the sources listed, trying to use only one source will not give you the most accurate information. After you start marketing the property the MARKET (prospective tenants) will let you know if you are on target with the rental amount. No calls or several showings but no applications may indicate you have priced the property above market rent. Ten applicants on the first day of showing may signal you are below market rent. Be prepared to adjust your asking price, as you test the rental price on your ad. For example market rent appears to be $1,500 but you want to try for $1,575. Give it a week and see what happens. You need to know your comfort level, if you can afford an extra week of vacancy and not stress about it, then test the market.
When you show your property to prospective tenants it’s also the time to sell them on your services as a landlord. Let them know you offer 24 hour emergency cell phone coverage, ongoing routine maintenance, and convenient ways for them to make rental payments online. Your investment property is your business and your property is the product. Residential investment property is also a service based industry. Tenants are your clients and they are looking for the best product with the best services offered. Successful business owners research their market, offer the best product they have and create loyal clients with great customer service.
Wishing you continued success!
Tamara Simon President & Designated Broker of Rental Property Guru provides coaching, classes and connections for investment property owners. With over 25 years of experience as a private landlord and former owner of a property management company Tamara offers a common sense approach to the risk and rewards of being a Landlord. You can reach Tamara at tamarasimon@comcast.net or (206) 850–3630.
