Hello all, just wondering what the vacancy rate is in the Lehigh Valley (Easton, Bethlehem and Allentown) area, especially for multi-family houses. I heard some pockets can have over 20% vacancy rate, which is kind of scary. Thanks all!
In Allentown we use a 10% vacancy rate for center city properties, although, right now out of about 400 rental units in center city we only have 4 vacant and 5 move ins for the 1st.
10% is the standard. But what does a number in theory mean in practical terms The effects of a vacancy rate depends on how leveraged you are and how long you can carry empty unit(s). I used to treat any vacancy as intolerable. Now i don't really even use it except to evaluate an acquisition. (I still mentally treat a vacancy as giving good money away.) Do whatever it takes to keep them occupied continously for as long as possible. The consequences of a bad tenant choice is in the process of qualifying the application. And letting a tenant in arrears go more than 2 months usually means they will never catch up and will look to move without paying the current landlord. And two months can easily turn into 4-5 months even if you get them out in 2. Pick them as right as possible and vacancy rates won't matter much (since yours will be minimal).
@Joe C Are you Joe C Sr. or Joe C Jr. ?? How do you have time to post here with 400 rentals?? ha ha
Haha not either Joe C you are referring to. And I don't post often, I have alerts on my phone for when anyone is talking about Allentown, PA and try to offer some insight when I have down time.
@Joe C, sounds like you're bullish on Allentown with that many units! It's caught our attention as a market for buy, fix, hold within a reasonable management drive since Jersey City is so overheated right now. Do you suppose you could PM me a realtor that would show me the kind of multis that make sense rather than the dogs they want to get rid of? My experience is most agents are idiots who don't listen to their clients.
I only use a vacancy rate for figuring out the financials and if things really make sense. What I mean is running numbers on a triplex that brings in 3k per month - at a 10% vacancy rate is roughly 300 monthly, or 3600 in annual vacancy. This tells me I can be down one unit for up to three months (round numbers here) in lost rental income. The other gotchya that I dont hear anyone talking about is the cost to turn a unit.... paint, cleaning, advertising.... heck - even the customary realtor charges should you go that route.
That 10% vacancy rate can quickly turn into ONE unit being down for essentially ONE month - depending on how your doing your accounting as the costs to re-let quickly add up.
Im in the middle (actually light at the end of the tunnel) of an eviction and unfortunately its an inherited AND professional tenant. This guy has also caused another tenant (lived directly next door) to pull a "midnight move" and essentially disappear. So my triplex is only bringing in ONE units rent and the expenses to re-let quickly pile up (paint - clean - and put a management company on leasing a downed unit)... I haven't factored in legal and lost rent on the eviction yet. While this is really an extreme case you MUST plan for the worst and keep reserves! The saving grace to this whole debacle is I invest for cash-flow, and even after paying all the acquisition costs to this building THIS YEAR, Im still (barely) turning a profit on a net cash basis (before depreciation as well). Its been one hell of an education - then again it is preparing me for the larger stuff and "managing the managers"
Not to hijack the thread, but I would suggest a minimum of 10% vacancy when running your analysis - prepare for the worst and you'll probably be pleasantly surprised in the end.
Hi ... I'm totally new to the game and was wondering how you go about analyzing data for vacancy rates? What resources/data do you rely on?