FREE ONLINE CLASS
Learn How To Start Investing In Real Estate
FREE ONLINE CLASS
Learn How To Start Investing In Real Estate

The Actual Cost Of Vacancy

Written by Paul Esajian

Recent data suggests that we are in the midst of one of the strongest times to be a landlord. Rental rates are rising and vacancy numbers have dropped from the same time last year. While this data has to be viewed as a positive, it doesn’t mean that there won’t be some unexpected bumps in the road along the way. Good tenants can move on a dime just as quickly as bad tenants. Changes in employment or income can cause them to get out overnight. If this happens, you will be left with little notice to fill your vacancy. Every day that your property goes un-rented, it is costing you money – probably more than you may think.

The most obvious side effect of vacancy is the loss of income. Even if you have a reserve fund set up, it will get eaten up pretty quickly as the months go by. Instead of bringing in money, you are now coming out of pocket to cover all of the rental property expenses, with no relief in sight. This will cause you to pull money from other sources, including money you may have allocated for other properties. Within a few months, you will run out of money and be forced to make a decision as to what you want to do with the property. Without money coming in, things will turn south rather quickly.

In addition to not getting payments, you will also have to pay for utilities, taxes, insurance and advertising expenses. Just because a tenant leaves does not mean you can turn the lights off until a new tenant arrives. You have to show your property. This works much better when the lights are on and the house is heated. Additionally, if the house looks vacant and all the lights are off, you run the risk of vandalism and complications typically associated with an empty house.

The Internet has made advertising property much easier than in the past, but sometimes it is not enough. Craigslist and Zillow may be effective, but when you need to fill an immediate vacancy with a quality tenant you need to ramp up your marketing. This calls for a full blown attack that can include realtors or property managers that come with a fee. If you opt to stick with a yard sign, social media and the internet, you will be the one that will conduct all of the showings. This will take time away from other work and leave you running to and from your property all the time.

Lastly, you need to have your property looking its best. You will have to make any repairs and upgrades you have been putting off. This is money that most likely was not budgeted for and will be an additional expense on top of everything else. All of these expenses will add up quickly and cause you to ramp up the process of finding a new tenant.

An unexpected vacancy can cost more than lost income. These additional expenses will push you to the brink and test your reserves. This could happen on any property to any landlord. It is so important to have reserves and systems in place if and when this happens to you.