Real estate investors are keenly aware that vacancy rates affect your ability to make the investment work. If you have chronic vacancies, it means that you are asking too much in rent or that the area has more supply than demand. Unless you can afford to carry the mortgage debt without a full year’s rental income, you could be in big trouble.
Before beginning your investment plan, investigate vacancy trends. Also look at what is happening regarding new construction. If hundreds of new apartment or modest housing units are going to be built during the next year or two, what does that mean for your prospect of vacancies? The threat has to be taken seriously, especially if vacancies are already high in your city.
To investigate trends and vacancy, check with a real estate broker or loan officer at your bank. Both have access to updated information about housing and should know the current vacancy rates. Also go online to popular websites that advertise rentals and study how quickly units are being filled. Through this research you hope to uncover trends, including average rents for housing of certain sizes and features and make sure you appreciate the variables between neighborhoods. In real estate the mantra is always location, location, location and this also applies to the rental market. You want to understand where people want to live in your community and where new popular neighborhoods are being developed. Don’t try to fight the trend.
How does a vacancy rate compare with the local employment rate? These are critical questions that define whether the timing for starting a real estate investment plan is good or bad. The real estate agent, whether using local MLS data or consulting with an in-house rental specialist, should be able to advise you on the significance of the trend.
A sudden, large lay off and resulting unemployment can turn a good historical vacancy trend into a disaster. So while you need to have a grasp on what is occurring in your local building, you also need to be informed of employment and population statistics.
Additional help in getting stats for real estate vacancy trends can be found through a local landlords Association, if there is one in your community. Also, check with the Chamber of Commerce or in any local tenants organizations or rental referral services.