Posts Tagged ‘real estate rentals’

One of the key mistakes I have made in my real estate career is not accounting for vacancy in my cash flow projections. And vacancy will kill you, I’ve had 3 month vacancies that turned a cash flow positive property into a decidedly cash flow negative property.

Consider two landlords. Both need to find new renters. The first has a very desirable property in a great part of town, very close to transport and shops. The house has very nice woodwork details. Although the current tenant hasn’t moved out yet, the landlord lists on craigslist. He gets a lot of calls and sets up several appointments throughout the week. While the charm of the house is clearly apparent, the clutter of the tenant’s belongings detracts from the showings. Additionally, because there was so much interest, he raises the asking rent on the rental application $45 dollars higher than what was listed in the craigslist ad.  The rent was already on the high side for the square footage. The rental application has a page missing. He gets a few applications and then starts working on them, making several calls to get more information on the applicants, delaying the decision process.

A week later, landlord 2 lists his house. It is in also a good location but not as convenient and desirable. He lists it at an asking rent that is under market and has a showing of only one hour. The house is vacant and spotless. He clearly states in the ad that the applicants are to bring their own credit report and application. Many people show up during the showing. It is clearly a good deal and many turn in their application, even though the lease start date is in less than 2 weeks and not negotiable.  Landlord 2 makes a decision with 48 hours and has a tenant,  the same tenant that Landlord 1 finally decides on.   The tenant decides to go with Landlord 2 even though double rent is involved and wipes out any savings for six months.

Moral of the story,  if you want a tenant fast, list under market and have your act together.   Renting it quickly for less is usually better than 1 or 2 months of vacancy.  Ability to expedite the process helps too.


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