Owning property always poses risks. When that property is designated for use as a rental, vacancies can lead to additional negative situations.
Here are three ways that a vacant property can end up costing you money and putting you at risk.
Lost Revenue from Being Too Firm on Rent Price
When a landlord holds too firmly to a set rent price they risk losing out on revenue by turning down applicants who offer to rent the property for below asking price. According to Lindsay Curtis of Long & Foster Property Management, it’s a simple math problem.
If the landlord is asking for $3,000 a month and an applicant who wants to move in immediately asks to rent it for $2,900 a month, the total revenue lost over the course of a year is $1,200. By turning the applicant down and allowing the property to be vacant for another month, the landlord will lose $3,000 – or in this case $2,900 – in potential rent.
“By accepting that lower rent, you’ve achieved a higher cash flow for the year because you kept your property from being vacant,” Curtis said.
Lack of Reserve Funds for Unexpected Vacancies
Sometimes a landlord can’t avoid having a vacant property, whether it’s because of a down economy, a slow time of year for the rental market or needing to make repairs on the property while it’s unoccupied.
“If you’re thinking about becoming a landlord, it’s important to plan for potential vacancies,” Curtis said. “We recommend that landlords have funds set aside so they can afford to pay the mortgage and any HOA or condo dues they may have during times when a vacancy can’t be avoided.”
Potential Damage to the Property
When a property is vacant it’s not possible to have eyes on it at all times. The lack of an occupant makes it more attractive to burglary and vandalism. It may also mean that it takes longer for the landlord to find out that the property has been damaged – whether the damage is caused by intruders, severe weather or one of the home’s systems breaking due to age.
For example, if a pipe bursts in an occupied home, the residents will likely notice it quickly and shut off the water main to minimize damage. In an unoccupied home, the burst pipe may leak water into the home for a much longer period of time and cause further damage to the structure.
“This is why it’s important to try and keep vacancies to a minimum, and it’s also recommended to have a property manager who can help you assess these liabilities and manage them throughout the process,” Curtis said.