August 24, 2023

The Economic Impact of Rental Vacancy: Strategic Solutions for Property Management

Property Management

Rental vacancy is a critical issue that affects both property owners and the broader economy. The economic impact caused by rental vacancy can be substantial, leading to financial losses for property owners, reduced tax revenues for local governments, and decreased economic activity in communities. This blog aims to explore the economic consequences of rental vacancy and propose strategic solutions that property management can employ to combat vacancy loss.

Does Rental Vacancy Have any Economic Impact?

In short, yes. But let’s explore how. A healthy rental vacancy rate is considered somewhere in the 5-10% range. 

That seems relatively small on a grand scale, but keep in mind, that figure should be considered based on the vacancy loss calculation on a portfolio or even an asset scale for individual investors. 

Rental vacancy can have lasting and extended effects when it comes to the economy. Financial losses are one of the most prominent implications and they can kick off a severe trickle-down effect for property owners. 

Financial loss extends further than a decreased monthly income. Loss of revenue can trigger affordability issues for mortgage, maintenance, management, and other expenses that are directly related to the sustainability of the property. This can ultimately lead to property deterioration and even foreclosure. 

Even further, the impact that rental vacancy has on the economy is an issue that can potentially extend beyond the property itself and filter out into the community as a whole. Reduced rental income results in decreased spending by property owners. When there is a decrease in spending it’s followed by a decline in consumer demand for goods and services. This, in turn, affects local businesses, leading to job losses and reduced tax revenues for local governments. Additionally, vacant properties can become eyesores, lowering property values and deterring potential investors.

How Can Property Management Strategically Provide a Solution to Vacancy Loss?

Combatting vacancy loss is at the top of the list when it comes to rental property operations. It’s also why partnering with a property management company is significant regardless of the size of your property, single-family or multi-family.

Property management companies not only understand the value of keeping financially responsible tenants in units, but they invest time, resources, and ongoing efforts and practices in mastering strategy to make that happen.

Here are a few strategies that will help keep vacancy loss at bay:

Effective Marketing and Tenant Screening: It’s like an ongoing cycle when it comes to rental properties. Marketing, screening, and maintaining - it never ends. So, it’s safe to say that implementing effective marketing strategies partnered with thorough tenant screening will be significant in combating vacancy loss. Property managers should utilize all available tools that can enhance these efforts including targeted social media, rental platforms, and other localized marketing campaigns to attract potential tenants. Additionally, implementing a rigorous tenant screening process can increase the likelihood that more qualified and reliable tenants are selected. In tandem, these efforts will reduce the probability of vacancies caused by non-payment or property damage.

Competitive Pricing and Incentives: Setting rental rates can be tricky! Too high, and there’s the risk that the local market cannot sustain it, too low and there’s the risk that the property value and scaling of the earning potential might suffer. Before setting prices, property managers should conduct thorough market research to determine competitive rental rates. Conducting a market survey will help establish the norm of the area, and identify the properties that the subject asset is competing against for tenancy. Offering competitive pricing can attract tenants and reduce the time a property remains vacant.

PRO TIP: Occasional incentives like a waived admin fee, reduced security deposit, rent discounts, or flexible lease terms can entice potential tenants and increase occupancy rates.

Regular Property Maintenance: Curb appeal is the equivalent of a glowing smile. It will grab attention every time, but just like a bright smile, daily maintenance is required for it to continue to shine and maintain its essence. A well-ordered property is likely to attract tenants but it is the property maintenance that will hold them. Property managers should prioritize regular maintenance, promptly addressing repairs and ensuring that properties are in good condition, at all times. This increases tenant satisfaction and tenant retention. It is also superior for maintaining (or even increasing) property value.

Tenant Retention Strategies: The first thought many may have is to worry about getting new tenants in. Yes, that’s very important, but taking care of and keeping the existing tenants is equally if not more important. Focusing on tenant retention and satisfaction will be key to preventing bleeding occupancy and it’s also a strategy within itself.  People who enjoy where they live are likely to express that sentiment and encourage friends and family to consider it when they are looking.  Build relationships with tenants through events, offering reasonable upgrades that are cost-effective but also attractive. Showing appreciation goes a long way.

Connect with the community and local organizations: Localized marketing is a gem. Collaborate with local organizations, such as universities, corporations, or non-profit agencies, to establish partnerships that benefit both parties. For instance, partnering with universities can provide a steady stream of student tenants, while collaborating with non-profit agencies can offer housing solutions for vulnerable populations. These partnerships can help maintain high occupancy rates and reduce rental vacancies.

How Can NREMG help you with vacancy loss?

Rental vacancy poses significant economic challenges for property owners and local economies. However, by implementing strategic solutions, property management can combat vacancy loss effectively. Marketing, competitive pricing, regular maintenance, tenant retention strategies, and local partnerships are certain ways that property managers can help minimize rental vacancy, empowering financial stability for property owners and fostering economic growth in communities.

National Real Estate Management Group has been empowering property owners and real estate investors financially by assisting in laying a solid foundation for their property portfolios. We are market experts who prioritize our clients’ success. We can do the same for you. Contact us today and learn how we can help you combat vacancy loss in your portfolio.