The one thing everyone can count on is change, and owning rental property is no different. Shifts in consumer preferences, volatility in rental rates, and trends in community and interior features may all impact your rental property at one time or another.
When you see your property’s return on investment start to fall, consider following through with any of these actions:
What To Do When Your Rental Property Stops Performing
Reassess Rental Rates
When you have plenty of inquiries about the property but few showings, it might be time to see where the rental market stands in terms of price and value. If you’re having trouble renting your unit, it may be priced too high for what you’re offering, or there’s a dwindling number in your prospective tenant pool. If you use a property management company, they may provide this service for you. They’ll also be aware of local forces that may be driving the local demand for rental housing.
If you self-manage the property, make it a priority to assess the monthly rental rate for rentals similar to yours. To conduct your own analysis, use online resources like Craigslist, Realtor.com and Zillow to find the monthly rental rate for other units that are similar to yours within a reasonable distance. Note their monthly rents, deposits, lease terms and amenities.
You can put these data into a worksheet on your computer or simply do it by hand. It will give you an idea where you stand in terms of the pricing within your competitive area and how you stack up. People who rent may not do as much shopping around as people who buy homes, but they still compare prices, features and property condition.
Increase Tenant Retention
Entice residents into a lease extension. Share the savings you achieve when someone extends their lease. Besides the time-consuming hassle of finding new tenants, you won’t have to carry a vacant rental. Offer a menu of benefits to good renters whose lease is up, like upgrading interior or exterior features or maintaining the same rental rate especially if you conducted a competitive analysis and found that your home lies in the upper quadrants of rental rates.
See also How to Avoid High Tenant Turnover
Aim for Nonstop Occupancy
Act fast when you hear tenants are moving. Don’t hesitate to start advertising for new tenants right away. If you work with a property management company, ask them to start looking through their interest lists for qualified individuals. At move-out, the management company will send in their cleaning and maintenance teams and your downtime could be short.
Each month the home sits vacant costs you 8.3 percent of your annual income from that property. If it’s unoccupied for three months, that’s one-fourth of your annual cash flow alone from that particular unit. Most real estate investors can’t afford that.
Making the Most of It
Providing yard maintenance and cleaning services for interested clients provides an opportunity to increase your monthly income stream by adding an administrative fee for these services. This is a good thing to consider when your rental property stops performing the way you’d like it to.
Don’t waive late fees. Unless the reason behind a late payment is truly exceptional, don’t excuse late payments from tenants. Leases or rental agreements specify when the rent is due and the length of the grace period, if any. If they send or give you a check minus the late fees, return it and ask for one that includes the full amount.