When it comes to rental properties, many landlord go back and forth about whether having vacancies or questionable tenants is the better option. You may not always have a choice, but you should at least be aware of the “pros and cons” of each in case you are faced with a decision in which the only person available to fill vacancies isn’t your first choice for occupation, to say the least.
Is It Worth It to Fill Vacancies with Subpar Tenants?
“Each investment opportunity is only as good as the execution,” which means that if you haven’t mastered the process of tenant screening and application scrutiny, you may find yourself with someone living or working within your building who is less than ideal. To begin really ensuring that your system is solid for selecting the best applicant, consider credit score. Unfortunately, it can be easy to have a good score even after financial ruin if the person has cleared their debt. Alternatively, someone with unusually “bad” credit may simply not use it and would otherwise pay their rent on time every time. It’s difficult to say what kind of tenant the person will be based on this factor alone, so don’t be tempted to allow it to dictate your selection.
What else could be a potential problem for you within this search? A lot of what could face you with issues on your property is the rental rates of your space. Make sure that you aren’t asking for far too much (causing vacancies) or far too little (drawing in questionable tenants). Do sufficient research into the market so that you know what comparable properties in the area are asking for and, if you can, what their success has been. Once you’ve set a fair price, though, make sure you can be flexible in order to attract and keep good (or even average) tenants. Too often, property managers are unwilling to budge just a little in reducing costs for very attractive tenants, or they are unwilling to consider “okay” tenants who are actually willing to offer more. Again, flexibility is key to avoid major business losses.
These business losses often come with long-lasting vacancies and can cost you big time. For example, “if you’ve got four $900-a-month rentals sitting vacant for 6 months, you’ve just lost $21,600 [and have] made zero returns.” That shouldn’t sound acceptable to any property manager, so don’t let it happen to you. Instead, think hard about how long you go can without making a profit on those places, or even with losing money as a result of the vacancies, and then consider your rental applications again. If you have no applications waiting for a response, go on to reconsider your strategies in drawing people in so you can fill those spaces as soon as possible.
The best way to ensure that you don’t have to decide between bad tenants and vacancies is to do your homework. “Know the local market” and think hard about how empty units might impact your finances. If you can learn to attract a lot of potential tenants and then implement a solid screening process, you’ll be on the right track to keeping from facing the above dilemma.
A good start into making sure you have all the resources you need to fill vacancies is to use a powerful software solution like SKYLINE. SKYLINE Property Management and Accounting Software can aid in your tenant screening by keeping all of your documents and information within one database for easy access. It can be used effectively with all types of properties, putting it in your hands for optimum use whether you have a commercial or residential property. SKYLINE is tailored to your experience, so as any of your needs change, SKYLINE changes with you, making it one of the most beneficial tools that you could have.