Long term rental vacancy vs. market rent
Hi I have just moved out of my previous house, which is a 5Bedroom 4.5 Bathroom in a premium location. Im wondering how long is a normal range of time for a high-end market long term lease to be in place, like rent for $10k per month ? I had someone almost signed the lease one week after listing, then it falls off, it feels like forever to me now. Im wondering how you balance the vacancy and the market rent. Would you lower your rent to lower than market price to get more vacancy ? at which point would you do so ?Thank you in advance
#3 Buying & Selling Real Estate Contributor
- Rental Property Investor
- Hanover Twp, PA
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#3 Buying & Selling Real Estate Contributor
- Rental Property Investor
- Hanover Twp, PA
@Jianlan Sheng, I can't speak to your exact situation with a high end rental but I think you are focusing on a VERY important topic and something that isn't discussed nearly enough.
When a landlord looks to determine market rate for ANY long term rental, I think the tendency is to find the highest comps and use those as their guide post. However, if you get high rent at the expense of increased turnover and vacancy then that may not be "market rent". You might actually make more by charging LESS.
I personally have a target vacancy rate of 5%. I budget for that rate of vacancy and work to exceed that rate on average. That can be done by being more conservative with rent prices, offering amenities other properties don't like washers & dryers, or even how you handle turnovers to shorten the time between tenants.
I think its hard to find great statistics on what vacancy is "normal" for most markets and rental unit types, but if you budget for a certain amount of vacancy that you're comfortable with and then identify areas where you can work on lowering your vacancy you are actively tacking and managing the issue/cost.
Thank you for your advice. This is very helpful. My listing went live for one month now, this would be my 2nd investment property. I totally agree with you. Im based on Palm beach area, where similar properties around is charging 11-13K per month. Therefore, im getting into a place thinking is it because of the holiday season or i should just go ahead and less my rent. But your strategy is much better, because once you set up the vacancy goal, then it will be much easier for me to make my decisions rather than GUESSING or PRAYING, LOL !!!! THANK YOU
Quote from @Kevin Sobilo:
@Jianlan Sheng, I can't speak to your exact situation with a high end rental but I think you are focusing on a VERY important topic and something that isn't discussed nearly enough.
When a landlord looks to determine market rate for ANY long term rental, I think the tendency is to find the highest comps and use those as their guide post. However, if you get high rent at the expense of increased turnover and vacancy then that may not be "market rent". You might actually make more by charging LESS.
I personally have a target vacancy rate of 5%. I budget for that rate of vacancy and work to exceed that rate on average. That can be done by being more conservative with rent prices, offering amenities other properties don't like washers & dryers, or even how you handle turnovers to shorten the time between tenants.
I think its hard to find great statistics on what vacancy is "normal" for most markets and rental unit types, but if you budget for a certain amount of vacancy that you're comfortable with and then identify areas where you can work on lowering your vacancy you are actively tacking and managing the issue/cost.
#4 All Forums Contributor
- Plymouth, MI
There is no magic number. Each market/area is different based on too many factors to list here. The best way to get your answer is to analyze the rental comp history in the immediate area of, and the same size as, your property. That history will tell you how long it took to place a tenant for your house based on the rent.
I always go a little conservative at this time of year. If my property shows way better then the others then asking for the top end can make sense. Here is my philosophy; if I price myself too high and it takes 30-60 days to secure a tenant and if I would have adjusted my price by 5%-10% I’m actually ahead even if I am under market. In your case, if you offer the rent at $9000 instead of $10,000 and it rented in two weeks you could actually be ahead depending on market time.
Each time I put a property on the market, I reevaluate the market rent and see where I stand.
Best of Luck.
Mr Jianlan,
I don't Understand your roll. I manage Real Estate company, I train realtors.
I tell you, not all realtors are equal, and on rentals is even more important. You need a different knowledge to rent or to List-sale houses. I know top earners realtors who don't know how to do rentals, is not their forte. Why will you spend time doing rentals for a month commission compare to a 6% commision on the value of house.
My advice do more research in the realtor you hire, on his LOCAL knowledge of LOCAL market. He will have the answer for your question and should be an answer conditional to today's market.
Good luck,
thank you all !!
Quote from @Luis Maqueira:
Mr Jianlan,
I don't Understand your roll. I manage Real Estate company, I train realtors.
I tell you, not all realtors are equal, and on rentals is even more important. You need a different knowledge to rent or to List-sale houses. I know top earners realtors who don't know how to do rentals, is not their forte. Why will you spend time doing rentals for a month commission compare to a 6% commision on the value of house.
My advice do more research in the realtor you hire, on his LOCAL knowledge of LOCAL market. He will have the answer for your question and should be an answer conditional to today's market.
Good luck,
This is a very important point !!!!
Jianlan
When we talk to our savvy Investors. I tell them great that you want to be involved let's do another Investment. You are ok with managing one home, let's look in to passive investment syndication projects there are many options here in with bigger pockets.
Run your investment as a business, let people do their roll but you are the CEO. The old ABC Always Be Closing new opportunities. Don't get busy doing the administrative work do the productive work is more fun.
Regards,