Is there a vacancy expense?

Question

I am still new to all of this but I want to know. As a landlord when you have a rental property and a tenant moves out and the property is vacant, are you required as the landlord required to pay the mortgage, or is there something that can put a pause on it? is there something like a vacancy expense?

Bill B. · Answer

On average your monthly costs will be a couple hundred dollars more than when it’s occupied as you pay water, electric, trash, sewer, recycling, gas, etc. You’ll still be paying the mortgage with insurance and property taxes. And then when you finally find someone you’ll probably be paying a PM or realtor another $300-$1,000 for finding you a tenant. You’ll be tempted to take the first “ok” tenant. Don’t!  You think it sucks when it empty and you’re paying, wait until it’s occupied by someone and you’re still paying.

Theresa Harris · Answer

As the others said, you still have all the regular expenses plus any that the tenant covered (eg electric, water and gas).

Lucas Miles · Answer

@Nasir Smith you are still responsible to pay the mortgage, taxes, insurance, utilities, everything regardless if the unit is occupied or not. "Vacancy expense" is used to run the analysis side before purchasing, you have to assume the unit will not be occupied all the time so this "vacancy expense" can be used along with other normal expenses to determine if the deal will be a good deal or not.

Adam Martin · Answer

We just assume some degree of vacancy when running numbers to see if a deal will pencil out.  Some of us are more aggressive than others in reality where some will advertise and lease to the next tenant before the previous moves out to limit it while others are more conservative and wait until it is empty.  My bills increase because not only do I have to cover the mortgage but I also have to cover utilities that are generally paid by the tenant and I don’t show until empty.  We project the vacancy expense so we make sure to set aside that money so we can cover our expenses since nobody is going to give us a break when the money isn’t coming in.

Also not to get too deep but remember your economics professor when they talked about opportunity cost.  It isn’t just your expenses you are paying but the profit you lose per day.  This can motivate people to want to rent it quick but as @Bill Brandt pointed out the only thing more expensive than a vacant rental is an occupied home with non payers.

Eliott Elias · Answer

There are no pauses. You owe the bank every single month, no matter what your situation is.

Is there a vacancy expense?

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