If you’re aiming to maintain positive cash flow and secure high revenues, it’s crucial to focus on the vacancy rate of your multifamily investment property.
Rental income represents a large slice of your property’s gross revenue. If you see a drop in your revenue figures, it should definitely tell you that you have a high vacancy rate. In other words, your apartment complex is not generating enough income on account of unoccupied units. Obviously, you need tenants to live in these units so you can receive monthly rental income and share in the RUBS. If a tenant decides to move out, you will have to shoulder the cost of maintaining the vacant unit on top of not receiving any income from it.
It’s all a matter of keeping your tenants happy, which is a rule I have kept to heart ever since I started investing in the multifamily sector.
I realized that, in order to maintain great cash flow, I will have to keep the vacancy rate low and aim for a 90% or even 80% occupancy rate. To hit these numbers, it’s important that I focus on the very people who are leasing the units in the first place.
Maintaining tenant satisfaction should always be your number one priority, especially for property managers who are directly handling tenant concerns. Using the right steps can help you drive vacancy rates down, and I happen to have developed a specific set of principles and rules that are crucial to this goal:
Find the right property manager
Your property manager’s main concerns cover a wide spectrum of responsibilities and tasks. To put it more generally, your property manager should be concerned with addressing issues from renters. That being said, it’s important to find a property manager that’s flexible in dealing with tenants coming from different backgrounds. A positive attitude and a passion for service should be two of the most essential traits you should look for in an applicant.
Renovate and rehabilitate your properties
One reason why tenants vacate is that they don’t find the property appealing anymore, or that they found a lot of defects and issues that have become unbearable. When one tenant leaves the property due to these reasons, you can expect others to follow.
The best way to avoid this kind of scenario is to perform major rehabilitation and corrective works on these issues. Your plumbing and electrical systems should be routinely checked for problems like rusty pipes and short-circuited sockets. You can also upgrade the reception area, repaint the exterior of the buildings, and purchase new furniture, and so much more! Investing in these properties will not only increase the value of the asset, but you are also convincing tenants to stay and refer the property to people they know.
Humanize your relationships
Investors work with a lot of numbers. They want to run calculations and focus on getting the right numbers in generating greater cash flow. However, viewing a multifamily property based on the figures you are aiming for won’t exactly result in the outcomes you have expected.
One thing’s for sure, the vacancy rate has its basis on a wide range of factors that influence a tenant’s decisions: age, professional background, and personal preferences. Tenants are never alike, and that is why you need to personalize the way you approach each one.
In my experience, I always make it a point to have our community managers and leasing agents call tenants who live in our apartment complexes as “residents.” This is because I want them to feel like they are owning their units and they are living in a community rather than a rental complex. I also encourage my property managers to talk directly to residents and make sure they list down their concerns. This system has allowed me to bring my company closer to the residents and making them feel that the company is working towards their needs.
Using these three important principles can help you keep your vacancy rates low and allow you to create valuable relationships that translate to greater revenue.