The Goal of Great Property Management: Reducing Vacancies

If you own rental properties then you are probably familiar with all of the headaches that go with owning, maintaining, renting and repairing your property. It’s amazing how fast a profitable cash flow deal can go negative when the property management is mishandled (link to the resources for our Real Estate Investor Bronze Members). Whether or not you have the resources to support your properties through repairs, evictions, vacancies and the other money suckers that every investor knows… all investors would agree that it’s much better to avoid as many of these costly cash drains as possible.

Many costs of owning rental real estate cannot be avoided. At a certain point in time, every property will need a new roof; when tenants move out, you will need to pay for cleaning, do minor (sometimes major) repairs, and so on. One way to try to mitigate as many of these costs as possible is to minimize the biggest cash sucker of them all: vacancies. Having an experienced property manager in charge of your properties can make a huge difference in this area.

There are two main ways that superior property management can reduce the amount of time that your properties sit vacant, sucking money from your pocket. The first is preventative: place highly qualified tenants in your property to begin with. This is achieved by thoroughly screening prospective tenants. The second is through active marketing and timely management of the clean up to get your property re-occupied as soon as possible.

Many new or inexperienced investors fall into the trap of wanting to fill vacancies quickly at the expense of accepting only partially qualified tenants. While everyone’s personal criteria for what they will accept when screening tenants varies, I can tell you that, for the most part, the stricter you are, the more likely you will be to secure tenants that fulfill the obligations of their lease. While accepting someone with a few blemishes on their credit history may not end in an eviction or a broken lease, I have seen this scenario play out more often than not with less qualified tenants.

Here’s where good property management comes in. If you hire a property manager, they are not going to get emotional about the process of occupying your rental. They have criteria that they will stick to. Many investors, when leasing their own properties often overlook what a tenant looks like on paper and allow the new tenant’s pleasant personality to affect their decision. This is often a mistake, one that a good property manager will not make.

So, whether you hire a property manager, or learn the skills of property management yourself, keep in mind that the single most important factor in keeping your rentals profitable is reducing vacancies. Achieve this through thorough up-front screenings of new tenants and by an aggressive marketing campaign to find qualified tenants to fill your vacancies quickly. Always remember though, it is better to wait an extra month for a qualified tenant than to put a questionable tenant into your property who may need to be evicted three months down the road.

Until my next post,

James

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