Almost 30% of renters in Cook County, Illinois, were part of the very low-income bracket in 2019. This statistic has declined in recent years.
It’s information like this that can help you make better financial decisions when buying properties to rent out.
Vacancy loss is an especially crucial metric for landlords and property managers. Are you wondering what it is? Keep reading to learn about vacancy loss and how to calculate it accurately.
What Is Vacancy Loss?
Vacancy loss, in simple language, is the amount of rental income you lose when your rental units aren’t occupied. Whether you have a single apartment or an entire complex, there will be times when tenants aren’t there.
During these periods, you miss out on the income that would come from those potential tenants.
Importance of Calculating Vacancy Rate and Loss
Calculating vacancy loss helps you understand the financial impact of empty rental units.
By learning about this, you can develop strategies to minimize it. This metric also helps with budgeting and financial planning.
Calculating Vacancy Loss From Unoccupied Rental Units
Let’s imagine you have a 10-unit apartment building. We can suppose that each of the units has a rent value of $1,000 per month.
What if one of the units remains vacant for two months during the year?
Lost rental income is two months times $1,000. This would be $2,000.
The potential total income is ten units times 12 months times $1,000. This would give you $120,000
Are you wondering what the vacancy loss is? Divide the $2,000 by the $120,000, then multiply it by 100. Doing this gives you a 1.67% vacancy loss for the year.
Strategies to Reduce Vacancy Loss
Effective marketing and advertising are fundamental in reducing vacancy loss. Your rental units should be well-promoted through online listings, local publications, and social media. Be sure to use impressive photos, detailed descriptions, and competitive rental rates.
Putting a competitive price on your rental units is vital for attracting tenants and maintaining revenue. Research local rental markets to understand the price range for similar properties. Avoid overpricing because that can lead to extended vacancies.
Efficiency in the turnaround process between tenants is essential. You should shorten the time your units are vacant between one tenant moving out and a new one moving in.
Streamline the maintenance, cleaning, and inspection processes. Having a reliable network of contractors and service providers can expedite the turnover process.
After finding quality tenants, encouraging them to renew their leases is an effective way to stabilize your rental income. Offer incentives such as lease extensions, rent discounts, or property upgrades to entice tenants to stay. This continuity ensures consistent occupancy.
Vacancy Loss Is Avoidable
By staying aware and using the right strategies, you can minimize your vacancy loss. Doing this is much easier when you team up with the right real estate team.
That’s where Outland Real Estate comes in. We can help you make the wisest real estate investments. We specialize in calculating vacancy loss, potential profit, and so much more.
Before you sign on the dotted line for a Chicago property, be sure to consult with our team today.