As a rental property owner, you might be curious what the hidden costs of a vacancy will actually cost you. There are many ways in which it will affect your rental income bottome line. Find out more in our latest post!
Calculating the cost of vacancy or COV is critical when deciding to keep or sell your vacant rental property in the San Antonio area. As a landlord, you will inevitably have a vacant property at one point or another, and it is wise to be financially prepared for it. As you think about all of the ways owning a vacant property can cost you, keep in mind it can be more than you first assume. It isn’t just the loss in rental income, but also the hidden expenses you will need to manage that your tenant would normally take care of. Keep reading to learn more!
1. Lost Income
The most significant and most obvious hit you will take is the loss of income. If you are like most landlords and you still have a mortgage on the property, you will need to be sure you are able to make the monthly payments while the property is empty. You don’t want to default on the loan or begin missing payments because your tenant suddenly moved out. Have a plan in place to pay the mortgage and get a new tenant in there quickly. According to the St. Louis Federal Reserve Estimates, rental vacancy rates are rising in 2018 and this should be taken into account when deciding how much in reserves you will need.
2. Utility Bills
If you are trying to get new tenants in the door, you will need to have the utilities on so they can see the house. Most likely your tenants paid for these services in the past, but now they are your responsibility. In addition to your own monthly expenses, you will now need to assume the water and electric expenses for your vacant rental. With nobody in the house, your bills shouldn’t be too expensive but cannot be forgotten.
3. Marketing To Attract New Tenants
Naturally, you will want to get your property rented out as quickly as possible. To do so, you will need to get the word out about the new availability. Online advertising, getting quality photos of the rental and creating virtual tours of the property will all add up. Additionally you may need to pay a fee to a property management company if they find your new tennant. Keep these costs in mind when you are calculating how much a vacancy is truly going to cost you.
4. Screening Tenant Applicants
Screening new tenants is another fairly significant expense you will have to deal with. Even thought it is costly, it is well worth every penny. Background checks, credit checks, employer and income verification, and calling references (yes you should call references) will take you a considerable amount of time and money. However, now is definitely not the time to get frugal. Having bad tenants in the house due to lack of screening will absolutely cost you more than a short-term vacancy or the time and cost of extensive screening ever could. We wrote a seperate post addressing only this issue for landlords. You can check it out here.
5. I value my time, do you value yours?
As the saying goes, time is money and I place a high value on my time as I’m sure you do yours. The entire process of dealing with a vacant rental house, advertising the rental, and properly screening new tenants is often exhausting and time-consuming. This time you could be spending on other things that are important to you. Your job, your family and your free time just scratch the surface here.
6. A Good Tenant – Yes Please!
There is nothing better than your rental property being occupied by a high-quality, well screened, and respectful tenant. In a perfect world, you would want someone who can remain long term. To keep a tenant in place for the long haul means you have to do your part and be a good landlord. The tenant needs to want to continue living there. Address any maintenance issues as they come up and splurge on an upgrade or two as needed to increase the value of the property in your tenant’s eyes.
Had Enough? Thinking about selling your vacant rental?…
If your property is vacant for a little while, and you want to take advantage of the situation in a different way, you may be thinking of selling your house. Not having tenants in the house will make for the best time to allow buyers to see the house without having to schedule around tenants. Perhaps the previous tenant wasn’t too kind to the house and left it needing lots of repairs. We have seen it all at Capstone Homebuyers. We buy houses that have been left in rough shape by the tenants. We also buy houses that still have tenants (whether they are paying or not). If you would like to find out what a cash offer looks like on your property, give us a call or fill out the information form here on our website. We have an easy 3 step buying process that is free zero pressure.