Investing in residential rental property is one of the best ways for securing your financial future. One of the biggest killers of that plan is underestimating the costs associated with vacancies. According to the Nolo Network, one of the largest online libraries of legal information, vacancy costs are typically estimated to be 5% to 10% of the property's annual rental income. Vacancies are a fact of life in the rental property business, and although you cannot avoid them, there are things you can do to reduce them. It starts with partnering with a top-notch property management company.
Finding the Right Residents
Finding the right tenants for your rental home is the first step in reducing vacancy and turnover costs. That begins with a rigorous and consistent screening process. A quality property management firm will have a rigorous, standard process for qualifying residents and will apply it consistently to all applicants. Its services should include employment and income verification, background checks, and pulling credit reports. It will research court records for you to see whether the prospective tenant has had a previous eviction or other legal problems, and should contact current and previous landlords for the applicant's rental history.
Your management company should have a standard, legal lease agreement that outlines the rights and expectations of tenants and owners. This will help get the owner-tenant relationship off to a good start and reduce the chances of disputes later.
Keeping Residents Happy
Another key to reducing vacancies is to keep your renters happy so they turn into long-term residents. A high-quality, full-service property manager will not only manage your property well, but also your tenants. Today's digital technologies are changing the face of property management. The top management companies typically have automated systems that handle most all aspects of property management. Many of these systems let tenants pay their rent directly into the landlord's account, and have a portal that allows renters to access their account and check rent receipts, ask a question or report a problem 24/7.
Your management company understands the importance of a good landlord-tenant relationship and that being responsive to a tenant's concerns is key to that relationship. Quickly resolving resident frustrations, no matter how small, prevents an accumulations of small concerns that can cause a resident to start looking at other housing options.
Some landlords are reluctant to raise rents for fear their residents will move. A reputable property management company will know what comparable units are renting for and help you stay competitive. As long as your residents are happy with their rental experience, they generally won't leave because of a modest rent increase.
Handling Poor Tenants
Your management company will work hard to build rapport with residents and ensure a positive experience, but sometimes things happen beyond their control. Sudden personal, legal or financial problems can change a good tenant into a poor one. They may skip a payment or cause problems with neighbors. Evictions are not easy, but a management company that has a legal expert on staff will certainly make it easier.
Owners often have trouble deciding to evict a tenant, but a property management company will have a set policy of when to start the eviction process. The sooner a poor tenant is out of the property, the sooner it can be renovated, cleaned and rented again. And if your management company is on the ball, it will have a group of interested, pre-screened applicants just waiting for a property to become available.
Top property management companies are a vital component of your property investment team. Their knowledge and expertise will help you fill your rental properties with high-quality residents and create a positive owner-resident relationship that is important for turning renters into long-term residents.