Vacancy Rate - Posted by LeonNC

Posted by Frank Chin on July 30, 2006 at 06:55:22:


Great points.

While we’re at it, there’s another, pretty much a 100% indicator. Here in NYC, tenants pay fees to rental agents, between one months rent to 10% of the annual, depending on market conditions to find an apartment.

I don’t do all my rentals this way, there’s one in an area where the school district is exceptional, and I find people use rental agents trying to get a rental. Here and elsewhere, I find people figure it makes no sense to pay a $1,400 fee, then move in for a few months to a year.

I got rentals in other areas where I didn’t go to a rental agent to find tenants, but agents bring clients to me thru my ads. I got to be careful in these cases as it can lead to fee disputes, as the prospect can send his wife in later to see me direct to try to skip on the fee. Even here, the experience is the same, the tenants stay quite a while.

One guy I got over five years now is from an agent. The shortest stay from an agent referred tenant so far had been three years. This guy just had it with NYC, quit his job, moved to Ireland for 3 months to think things thru, and then relocated to Arizona with his wife and 4 year old.

For this rental unit, the tenant stays had been 4 years, 3 years, and 5 year so far for the current tenant. His 9 year old girl mentioned to my daughter that her dad hopes to move to a house some day. But based on what I hear of his “dry cleaning” business, it won’t be ant time soon.

Frank Chin

Vacancy Rate - Posted by LeonNC

Posted by LeonNC on July 25, 2006 at 08:08:40:

I know general rules of thumb don’t work but I thought vacancy rates for single family homes ran in the 5-6% range.

It’s been my experience that tenants move about every year. Luckily I’ve been particular in who I rent to and nobody has trashed my property. Is anyone else seeing the same thing? How profitable can rental property be with tenants moving every year?

I have a friend with many many rental houses and from the numbers he gives me he runs at about a 12% vacancy rate here. He says he’s created a monster!



Re: Vacancy Rate - Posted by Frank Chin

Posted by Frank Chin on July 26, 2006 at 09:28:34:


Here’s how I cut my vacancies:

  • The rent I charge is 10% below market to begin with. And for a SFH, it’s low enough to match some nearby 3BR’s so I get 50 calls on a rental, rather than the normal 10 or 12 for the first week.

  • With the lower rent, I get 12 possibles to choose from, within a week, rather than just the 1 or 2.

  • With the lower rent, when someone moves out on the 30th, I got someone moving in on the 15th. On a few occasions I got someone moving out in the morning, and someone moving in in the same afternoon, on the 1st. I give the new tenant a painting allowance to do it themselves. And I point out to them that the rent is so cheap that I got enough people wanting the place that I’m not waiting 30 days for them to give notice. For instance, the last SFR I rented, the couple concluded it was cheaper to pay rent on two places instead of renting a more expensive place that will wait for them to give a 30 day notice. By charging 10% less, I make it up just by renting it back out 30 days sooner each time.

  • And my criteria?? It’s not the highest paying job, the best credit score, its how long the tenant will stay in they’re particular situation. For instance:

– A kid out of college might be there less than a year, to take the great job out of state that he applied for even before he moved into my place.

– A guy who just met a girl, looks for an apartment lasts a year or less. I had a few of those, and a single guy happy with my apartment for three years, moved out to be with a girlfreind, and called me back in 2 months and ask if his former apartment is available. His new landlord had to re-rent the place after TWO months.

– A married couple with a kid, just makes enough to cover the rent stays the longest. So forget about the BIG income couples that buys their dream house. These couples stay forever, if not to keep their kid in the same school, and rarely moves if the rental is in a good school district.

– An older person, especially single, with a few years to retirement would stay a few years, then move to their retirement destination, and the lazy types won’t move because its such a hassle. ANd it takes a year or too sometimes before they can decide where to retire to.

– There was a 1BR that I was renting to single guys or girls, and the tenancies was one year or less. One guy moved back home to mom, one girl was tranferred to another job, one found a boyfriend, a cop got fired etc etc. I was painting every 6 to 9 months, and never mind losing rent. So when a heavyset not too attractive 50ish women came by, she was the perfect candidate. She’s the head waitress at the local diner and worked there 20+ years. She won’t be promoted, transferred, move in with a boyfreind, get married, or get fired. She was with me 6 years till she got MS, retired, to baby sit her granschildren.

– I don’t generally rent to students, but one rental is near two colleges, and someone starting dental school or law school would stay for the duration, three years or more. One law student was with me over 3 years, including the time in law school plus the first year on the job, before she got the better job. On the other hand, if they want to rent the place right after law school, plan on a one year tenancy or less.

– Another is someone moving into the area not only to be convenient to work, but close to relatives that babysit. They might be able to find better rentals, but necessarily one that everything fits so perfectly.

Hope this helps.

Frank Chin

Collection Factor - Posted by Jimmy

Posted by Jimmy on July 25, 2006 at 14:29:42:

To me, its not the vacancy rate that is key. it is the “collection rate.” This is a slightly broader measure, because it incorporates no-pays and slow-pays. Pretty easy to calculate. Divide you actual collections by the maximum possible collections.

I run 85%, year after year. My stuff is a collection of 1-4 unit properties.

anyone know how to rev it up higher, PLEASE educate me.

Re: Vacancy Rate - Posted by Berno

Posted by Berno on July 25, 2006 at 12:48:14:

I’m no expert, but when I buy a home I run the numbers figuring 2 months out of each year as vacant (16.7% ?). If I can make it cash flow then I know I have a winner. Why 2 months a year you ask? When someone moves out, in my experience, they may not give much notice. When they vacate you have to go in, clean, maybe paint etc. While this is going on you field calls from prospective renters. By the time you get the house ready and select a GOOD renter a couple of weeks have passed usually. The people you select may need to give 30 days notice. A month and a half with no income happens pretty quick. I know there are ways around the time issue usually, and sometimes I have the home rented before the current folks leave, but allowing for 2 months a year vacant will prepare you for the worst.

As a side note, contrary to what other may say, I stopped painting after people move out (needs it about 1/2 the time I find). I simply inform the people moving in that they can select the colors (nothing too dark or odd!) and I will purchase the paint for them. This has worked VERY well. Saves me a bunch of time and they get the look they want.

I will also contend that no matter how easy some people say it is to get a SFH rented, it all depends on your area…what is on the market as far as other rentals and who is out there lookin’. If there are 10 people looking to rent a home and 178 homes listed for rent, it ain’t gonna be easy!


Re: Vacancy Rate - Posted by dealmaker

Posted by dealmaker on July 25, 2006 at 09:13:51:

It’s easy to bring your vacancy rate waaaay down. For about a 10 year stretch we owned 16 rentals in Houston, all SFHs. Other than a few “week long make readies” I had ZERO VACANCIES.

I got tired of doing so much painting every summer, and replacing the stuff that you do when it’s empty “cause it’s easier to do when empty”, so I changed my entire rent house attitude and actions.

I went to TWO YEAR LEASES, no exceptions! If you’re not stable enough to stay two years, I DON’T WANT YOU. As a result my average tenant stay was 6 YEARS.

I made my house a bit nicer than others on the block, a couple hundred on landscaping, garage door openers, solar reflective screens and extra insulation in attics to keep electric bills down.

Every time I replaced a vinyl floor I went to ceramic tile. It looks expensive and you never have to replace it.

I raised all my rents after doing this. On average I was getting $50-$90 more per month (average neighborhoods of $600-$900). When lookers pointed out that my rents were higher than the house down the street, I told them to go rent that one! When they told me the one down the street had dog poop on the carpet and holes in the sheetrock. I told them that was why they were cheaper.

In that time I never did an eviction. Never had anyone move owing me money and never had any “unusual” repairs to make. And I had all summer to sail and play golf,instead of painting etc.


Re: Vacancy Rate - Posted by Anne_ND

Posted by Anne_ND on July 25, 2006 at 08:40:17:


I got into real estate because when I moved to ND I encountered a very pet-hostile rental market. As a pet-owner I was reviled by landlords- something I’d never encountered before. I ended up (happily) paying an extra $100/month to have my cats live with me. Friends of mine had to give away or put to sleep their pets in order to accept jobs at the same employer.

That seemed crazy to me- so I started buying houses that were a little run down but with some charm. I bought cheap, fixed them up with some nice amenities and rented them… to pet owners. I had no competition in the market. I had (still have) a waiting list and my rents were high with tenants with near-perfect credit. In my first rental house I had tenants who stayed 3 years and moved to buy their own home, now I have tenants who have been there for 4 years and plan to stay at least another year. Most of my tenants stay at least 2 years. My second tenants (in another unit) moved out 3 years ago but they still call me to say hi and send Christmas cards, and send me referrals.

I just treat my tenants the way I wanted to be treated- I don’t check up on them, I respond quickly when there’s a problem (which is rare), and I let them have pets. My rules are simple: pets must be neutered, vaccinated and the owners have a dog-bite rider on their tenants’ insurance.

Your market may be very different- but there might be some amenity you could offer that would make your rentals more desireable than the competion. Failing that, outfit your rentals so that between-tenant expenses are minimized- such as invest in high-quality flooring (not carpet) that doesn’t show wear, or neutral semi-gloss paint that can be washed or touched up instead of re-painted every year.

My vacancy rate runs less than 5%.

good luck,


Re: Vacancy Rate - Posted by matx

Posted by matx on July 26, 2006 at 22:58:13:

Frank, you always offer great information.

We have our own scoring system to evalute applicants. The estimated length of stay and stabilty are two of the factors we look at, but maybe we should add “attractiveness (or unattractivness?)”, which may affect stability and the length of stay :wink:

We don’t like applicants with great credit (not that we really come across them, only 1 out of 10)–they’re usually temporarily renting until they buy a house or they break the lease to move out of state!

One couple (FICO 790) broke the lease a few months ago (but paid the rent until the replacement tenant moved in as well as the reletting fee). The new tenant is right out of law school, but he and his wife have huge student loans so we’re hoping they won’t qualify for a mortgage after a year!

Now another tenant is breaking the lease after 6 months into the lease. She got promoted and is relocating out of state. She (and her 4 kids and brand-new husband) was supposed to stay for years! (Thank goodness, we have double SD from her.)

Now we’re looking for a slacker tenant who won’t get promoted…

Re: Collection Factor - Posted by dealmaker

Posted by dealmaker on July 25, 2006 at 15:31:48:

Jimmy I hate to say this but (IMO) that is a pretty sucky rate. No wonder so many folks say they can’t make money at this.

I always liked “slow pays” because that puts a nice chunk of late charges in my pocket.

“Rent is due on the FIRST, it is LATE on the second! No exceptions, no waivers no excuses”. I “nail and mail” a three day letter on the third, NO EXCEPTIONS. Late charges start on the 10th, although the latter may be an issue of state or local law.

I explain this to renters at APPLICATION time. If they hesitate it saves them the time of filling it out and you the time of checking them out.

The landlord is in charge, the tenant is not.

The landlord is in charge, the tenant is not.

Tenants are like kids, they’ll get away with whatever you let them.

Try lengthening your lease, it might work wonders for you like it did for me.


Re: Vacancy Rate - Posted by Frank Chin

Posted by Frank Chin on July 27, 2006 at 08:05:45:


You win some, you lose some. Sounds like you have a system similar to mine.

While I try to go for those who’ll stay the longest, as you said, credit for 90% or more of them are lousy, I wind up reluctantly picking one outside of the “stability” criteria sometimes. And those with sterling credit I don’t expect to stay for long. It’s just the nature of the rental business.

A number of years back, it was a slow August, and I had no good prospects for a rental from those who applied, and held the rental over another week. One fella, named Bart, saw the place early on, really liked it, and called everyday.

At first, I told him the we’re processing another applicant, which wasn’t true. Then, by the end of the second week, still running the ad, Bart called to ask why we’re still advertising, and how things went with the other applicant.

Bart planned to move in with a live in girlfriend. This girlfriend, as I recall, is the daughter of an millionaire industrialist from Brazil, living off a sizable monthly allowance from dad. She’s rather quiet and demur. Bart, on the other hand, works part-time behind the counter of a hardware store, is a fast talker, and loud.

I addition, Bart roars in on a motorcycle, and tattoos up and down both arms. The stability factor is close to zero here.

I had to decide whether to keep advertising, lower the asking price still more, lose another 30 days, or rent to someone calling me on it everyday. My final decision was, we want stable people so we won’t have to do this again. But if things are so slow, why not rent it out, and if they’re gone in a year, or less, we’ll have better luck. Afer all, tattoed motorcyclists and their girlfriend got to live somewhere.

And you have to consider if the tenant such as this will wreck the place. BUT, experience had shown me that it depends on the women, and someome neatly dress, softspoken as she, is not the type that will live in a wreck.

So I explained to Bart that we’re looking for someone who can stay at least two to three years, and we’re procssing another couple (which didn’t exist). We’re hoping someone will materialize. Bart shook his head, “no, no, no, I plan to stay several years. Where will I go??” I know the answer to this one is he’ll wind up on the street, but I kept it to myself.

I can see Bart is mooching off a rich gilrfreind, and the incompatibility of the two is quite apparent. My answer to Bart was “you may think you’ll be here several years, but I already KNOW that you won’t last more than a year”, with a smirk on my face. Bart said “how do you know that?”. My reply “I’m in this business long enought to know”.

So I rented him the place, explaining to him “I’m making an exception because I like you so much”. Have to learn to lie with a straight face in this biz.

I go by each month to pick up the rent checks, and most times, Bart was around, and on the second or third month he asked if I was going to paint the lobby and hallway as I mentioned. I told him that it all depended on him since he won’t last a year anyway, telling him “I don’t want to paint the place, and find that you’ll be moving out the following week.”

Each month he laughed at me pointing out he was there six months, then seven, and on the eighth I finally gave in painted the place, as it needed it. He wanted to take a bet with me on the ninth month, that he’ll stay a year, and he goaded me into taking on the bet that he’ll be there at the end of one year.

I thought it was a foolish bet for me, and I’ll wind up with egg on my face, but if I’m wrong, at least I have a longer term tenant than I thought.

What do you know.

On the end of the 11th month, Bart’s girlfriend threw him out. She left a few months after. As it turned out, the market turned out better, and the next tenant was with me several years, up to the time I sold the place. In fact, he stayed on with the new owner, even paying market rent.

On his departure, I told Bart, “you just have no idea that you won’t last a year, but I do”.

I’m right about 80% of the time, and in some cases, it actually worked the opposite, where I rented to someone expecting a one year tenancy, and like the young pharmaceutical salesmen that move out to be with a girlfreind, lasted more than three years with me.

Now that I’m thinking about it, busy people traveling a great deal has little time to date, to move, adding to the stability factor. And then the uglinest factor etc.

Isn’t this business fun??

Frank Chin

What’s Your Secret?? - Posted by Jimmy

Posted by Jimmy on July 25, 2006 at 18:03:04:

Dealmaker–Dude!!! I seem to recall that you are in TX, but not in the Piney Woods of ETX.

what’s your secret.

85% collection on max seems pretty good to me. I’m sitting on 90+ units now. 10% actual vacancy is pretty normal. The extra 5% is attributable to slows and no’s. I do collect a fair number of late fees, but I share these liberally with my managers.

Maybe you are dealing with higher class tenants? Mine are low income and working stiffs.

I hand out 3-day notices around the 15th-20th of the month. the process is fairly quick here. but not quick enough. I think I am being as d*ck-headed as I can be as a nasty landlord. But maybe I could be even nastier. hand out 3-day notices on the 5th??

there are some landlords on my turf who enjoy higher occupancy rates. but… they do not maintain their units, they charge a LOT less rent, and their tenants have no other place to go (unless they want to pay a lot more). we cater to the same class of tenant, but I provide a much nicer product.

I will say this: My SFR’s are vacant a lot less often than my 4-plexes.

Re: Vacancy Rate - Posted by matx

Posted by matx on July 29, 2006 at 20:28:51:

Frank, thanks for the additional tips!

-Look at the woman to assess if they are the kind to wreck the place. (The only tenants who wrecked our rentals are GF/BF couples–most unstable in our opinion. The women looked and acted fine, but the women turned out to be the violent ones! One was charged with assault. Maybe we need to improve our assessing skill.)

-Take a bet with tenants that they won’t stay as long as they say. (We’d better do that with one of our tenants who moved in earlier this year and plans to stay for 6 years!)

-Find someone too busy to move or date. (We have a professional, single father too busy to date or move, but he’s also too busy traveling to remember to pay the rent on time! He always pays with late fees, so that’s fine with us :slight_smile: