The goal of an investment property is for it generate revenue for you through rental income, but we can’t talk about rental properties and investment opportunities without also talking about vacancies.
Vacancies between tenants or during a major renovation project means you could be going through weeks to months without any rental income. This can have a major impact on your budget and how you allocate resources to the property.
What to know about rental vacancies
As a landlord or property owner, one of the most important things you need to be aware of is your vacancy rate. By that we mean what is the average number of days or weeks per year that your rental unit sits unoccupied without any paying tenants?
Between tenants, there are generally two steps that need to happen:
- First, you need to turn over the property so that it is 100 percent rent-ready.
- Next, you need to advertise the unit and go through the lease process with the new resident.
The more quickly you can buzz through these two steps, the better your occupancy rate and the more income you’ll generate from the rental unit.
Timeline for a rental unit turn-around
Within a day or two of a tenant vacating a property, we at RL Property Management go to the unit to conduct a move-out inspection. We take detailed photos of the property inside and out for the purpose of assessing the security deposit, as well as documenting what needs to be done to the property to get it ready to re-rent.
Once we receive owner approval to begin the turnover process, we get our team onsite cleaning up the property, painting, replacing the carpet, making any maintenance repairs, etc.
We find that most turns are able to be completed by our team – assuming no major damage or upgrades – within an average of two weeks, and that’s consistent with what we see in central Ohio.
The unit is rent-ready. Now what?
The next step is to immediately list the property for rent (for strategies on where to list, be sure to read this post [link to previous post]). In terms of leasing time, this can vary quite a bit depending on what type of property it is, where it’s located, what time of year it is, and how much you’re asking for in rent. The more desirable the property and the more competitive the price, the faster it will lease.
In terms of overall averages, our average leasing time is a little bit under three weeks. We are seeing single-family homes in nicer suburban areas leasing within one-to-two weeks. Larger apartment communities aren’t in as high of demand as they used to be, so they might take a bit longer – maybe three-to-four weeks depending on the time of year and how aggressive you want to be with the rent price.
The other factor to consider when thinking about vacancies is that you will have some outliers. While most units may lease within a few weeks, every once in a while you will have a unit that for whatever reason isn’t resonating with the marketplace, and it may sit vacant for six or eight weeks.
Understanding the total vacancy timeline
When you take all of this together, you’re looking at somewhere between four-to-eight weeks of vacancy every time the unit turns over. And, at least for our company, that is happening roughly once every three-to-four years, on average.
There is certainly a lot to think about in terms of vacancies and how it affects your income. Some years you will have no vacancies, and other years you may have several weeks where your unit sits unoccupied. We find that a good overall number to use when estimating an occupancy rate is around 94-95 percent. This is usually a safe bet as you prepare your numbers and look at a potential investment opportunity.
If you’re thinking about investing in property in Franklin County and have questions about what to expect, get in touch with our team at RL Property Management. We’ve been managing property professionally in the greater Columbus area for nearly a decade and are here to help you as you look to expand your investment portfolio.