Why You Need To Account For Vacancy After The 1st Rent Cycle - Even On High End Properties

3 Replies

I don't have a question - Just wanted to provide some education for any newbie buy and hold investors. I am learning the hard way why even nicer properties must account for vacancy after the 1st rental cycle.

My original projections included very little for vacancy since I only purchase high end rentals in nice neighborhoods given that I have a 30 day window to show my property during a tenants final month. I thought this would be more than enough time to rent out a nice place. While it is is most cases ; here are the 2 that have hurt me :

1 - Renting to a tenant that doesn't keep the place as clean as high end potential renters expect it to be for their money. Since the tenant is still renting ; its hard to get the property "rent ready" until your tenant is out. If they live like a sloth and are from out of town with random mattresses on the ground (that is what your prospective renters will see)

2. Allowing leases to come vacant during non peak times. (Non summer months). It may be better in the long run to have a tenant in place for just 12 months where it's easier to re rent right away(Say July to July) then the same tenant renting month to month after the original 12 months ends causing it to possibly open up in the winter where you could be sitting on it for a few months.

I hope someone can learn from my mistakes :

Thanks for the info. looking to buy my first rental soon!

in my personal experience, the higher end homes takes longer to rent.

the lower end homes or multiplexes are more likely to have people who are looking for something within 30 days. The higher end homes with higher rents are more likely to have inquiries from those who plan farther ahead, some may be looking to move in 60 days or more and you want someone sooner, or they may be downsizing from a 5/4 with kids going to college, and would like to rent but the dates are tied to their present homes' closing dates.

I also found out they are more likely to frown upon seeing homes while rented, the current tenant belongings all scattered with packing boxes, dirty clothes piling up in the laundry room - odor...is one thing, the idea of their home being visited frequently by applicants during their last month of stay is the other.

It is probably very locale specific thing but some homes I never show while occupied.

@sam Leon

I would agree with everything above. It almost seems like the magic formula is to find nice homes that are in cheaper neighborhoods where they will rent out for median prices.

This allows the majority to be able to afford yet still get a nice property while the investor still makes strong cash flow due to the low purchase price.

In the Midwest --- A $100,000 home renting for $1200/month is ideal and will field 4-5 phone calls per day where as a $150,000 property renting for $1400 will fuels just 4-5 per week yet both are still on the higher end of available rentals on the market.

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