SS238: How to Reduce Vacancy Rates

SS238: How to Reduce Vacancy Rates

In this episode, Charles Carillo breaks down why your rental is sitting vacant and how to fix it. He explains the cost of physical vacancy and shares actionable strategies to reduce downtime, attract quality tenants, and retain them longer. From making units 100% rent-ready to improving listing photos, pricing correctly, and responding quickly to inquiries, Charles covers it all. He also emphasizes early lease renewal talks, offering incentives, and verifying tenant income to avoid fraud. Small changes today can drastically improve your rental cash flow and long-term property value.

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Talking Points:

  • Reducing vacancy is one of the best ways to maximize the NOI at your property. No matter what type of rental property investing strategy you are applying, a value-add renovation deal, a turn-key property, or maybe you purchased a property that was mismanaged and you are getting it back on track, reducing vacancy will be a significant part of the stabilization process. Now before we dive into the how-to, let’s clear up a common confusion around vacancy.
  • As a side note, there are two types of vacancy: physical and economic vacancy. You can check out episode SS74 to learn more about them in depth, but in this episode, we will discuss reducing physical vacancy, which is what most people refer to when they simply say “vacancy.”
  • Let’s break down what actually goes into reducing vacancy. Reducing vacancy is a two-pronged approach, involving minimizing downtime between tenants and increasing the renewal rate of current tenants. To learn more about Understanding Vacancy and Make-Ready Costs, check out episode SS151. Making minor improvements in each of these will increase your bottom line and dramatically increase your property’s value over several years. Here are some strategies I have utilized to reduce vacancy in my properties. So let’s start with what you can do when renting to new tenants…
  • Renting to New Tenants.
    • 1. Property Condition. Ensure the property is in good condition and the unit is ready for rent. Do not list or show the unit until it is 100% complete. In my experience, when I showed partially finished units to prospective tenants, they never rented them. For one reason or another, I now have a rule that we do not show any units that are not 100% ready for rent. If you want to learn about some renovations with a high return on investment, check out episode SS230. Keep open lines of communication with your handymen to make sure that once a unit becomes vacant, they can start the make ready process as soon as possible. Now once your unit is ready, how do you actually get it rented? That brings us to advertising.
    • 2. Effective Advertising and Marketing. I really wanted to name this point “Consistent” advertising and marketing, and not “Effective”, but when dealing with a smaller property, you hopefully won’t have many vacancies. Hence, taking inquiries for occupied units wastes everyone’s time, so you must turn marketing on and off. This differs from when we have a syndicated 100+ unit property, and we are consistently marketing, since there are always vacancies. 
      • Effective marketing starts with in-depth market research and competitive pricing. Inaccurate rental pricing usually decreases inquiries and prolongs vacancies, but can also harm renewals. It is not unusual for tenants, especially tenants new to the area or tenants in a bind, to overpay when they move in. However, after a year, when they realize what else the market has to offer, they probably won’t renew.

Once your pricing is on point, now it’s time to craft your listing the right way.

    • 3. Create Quality Listings and a Marketing Plan. Listings with low-quality or minimal pictures are a major turn-off when searching both for-sale and for-rent property listings, and I typically see the mistake made by mom-and-pop investors. They show a few poor-quality images of a unit with a previous tenant’s belongings all over the place, and they wonder why they cannot rent the unit. Or you see a for-sale-by-owner listing for a house, which is $500,000. The seller is trying to save money and takes the pictures themselves instead of hiring a professional photographer for a few hundred dollars.
      • Once you complete the renovation of a unit or finish the make-ready, take dozens of high-quality pictures. Additionally, write a detailed description with all of your tenant screening requirements. Look at a newly constructed apartment complex’s website and look at all of the information and the pictures they are offering to prospective tenants. Not saying you need to have a website for a 6-unit property, but they list everything, including how close the schools, grocery stores, and restaurants are to the property. They are very detailed. 
      • The last part of this is having a marketing plan. This is much simpler than it sounds. You already have the high-quality pictures and detailed unit descriptions. Next, make a list of where you will post vacant units when they are ready to rent. You can now put this all in the cloud and let your VA handle it. When you have a vacancy, they have pictures of that unit and the description and know how and where to post it.

Even with great listings, speed matters. Let’s talk about how you handle inquiries.

    • 4. Respond Quickly to Inquiries and have a Streamlined Application Process. When an inquiry comes in online or via phone, make sure someone is there to speak with them 7 days a week, or reply quickly to their online inquiry. I always set up group showings, splitting people up in 15-minute increments, since many people won’t show. Lastly, I would not share the application link until you have pre-vetted the person. I don’t want people applying and wasting money and time if they don’t meet your tenant requirements. I also hesitate to rent to people who have not seen the unit in person. Once you have a viable tenant, share an online link where they can apply. Make sure that it performs a background check, and always make sure that you are verifying employment and income. 

That covers finding new tenants—but what about keeping the great ones you already have?

  • Retaining Current Tenants
    • 1. Responsive Maintenance. When there is an issue, quickly respond to the tenant and promptly address any repairs, especially when there are emergencies.
    • 2. Property Upkeep. Properties require consistent maintenance and upkeep. Continually verify that the property’s exterior and interior are well-maintained.
    • 3. Open Communication. Welcome feedback from tenants and provide updates on maintenance issues if there is a delay in fixing the issues.
    • 4. Early Lease Renewal Discussion. Don’t wait until the final days of the tenant’s lease renewal period to start the renewal conversation. Start 30+ days before. This minimizes the chance the tenant has already begun looking at other properties. Don’t be afraid to offer a renewal incentive or agree to replace that stove, which has been a consistent issue. This is a win-win for both the tenant and the owner.

These strategies don’t just fill your units—they build long-term value.

  • Reducing vacancies at your property is the key to increasing your net income and its value. Many of these tactics take a little time to implement upfront, but they will help shave days and weeks off vacancies for years to come.

Transcript:

Charles:
Are your rental units sitting empty longer than they should? Have you ever calculated what those vacant apartments are costing you on an annual basis? Well, welcome to Strategy Saturday, I’m Charles Carillo. Today we’re talking about how to reduce vacancy rates, whether you’re managing a value ideal, a small duplex, or maybe a large rental property. Here are some of the tactics that my team and I utilize to minimize our vacancy rates. So let’s get started. Reducing vacancy is one of the best ways to maximize the NOI at your property. No matter what type of rental property investing strategy you are applying a value add renovation deal, a turnkey property, or maybe you purchase a property that was mismanaged and you’re now getting it back on track, reducing vacancy will be a significant part of the stabilization process. Now, as a side note, there are two types of vacancy.

Charles:
There’s physical and there’s economic vacancy. Now you can check out episode SS 74, SS 74 to learn more about both of them in depth. But in this episode we’re gonna be talking about reducing physical vacancy, which is what most people refer to when they simply say vacancy. So reducing vacancy is a two-pronged approach involving minimizing downtime between tenants and increasing the renewal rate of current tenants and learn more about understanding vacancy and make ready costs. Checkout episode SS 1 51, that’s SS 1 51. Making minor improvements in each of these will increase your bottom line and dramatically increase your property’s value over several years. So here are some of the strategies that I’ve utilized to reduce vacancies in my properties. And we’ll start off with renting to new tenants. So number one is property condition. So ensure the property is in good condition and the unit is ready for rent.

Charles:
Do not list or show the unit until it is 100% complete. In my experience when I’ve showed or partially finished unit to prospective tenants, they’ve never rented them for one reason or another. And now I have a rule that we do not show any units that are not 100% ready for rent. Now if you wanna learn more about some renovations with high return on an investment, check out episode SS two 30, that’s s SS two 30. But keep open lines of communication with your handyman to make sure that once a unit becomes vacant, they can start the make ready process as soon as possible and let them know not to show the unit because there’ll be people that come by if they’re on the street, they see work being done, they wanna live in that neighborhood and they’ll pester your handyman or you to let them in and to see what’s going on in there and what it looks like and just tell them no one’s allowed in there.

Charles:
And then to have them call, you know, the manager or if you’re the owner managing it, have ’em call you to set up a showing. Number two is effective advertising and marketing. And I really wanted to name this point consistent advertising and marketing and not effective. But when dealing with a smaller property, you hopefully won’t have many vacancies. Hence taking inquiries for occupied units, waste everyone’s time. So you must turn marketing on and off as you go. And this differs from when we have say a syndicated a hundred plus unit property. And we are consistently marketing since they’re always vacancies, they’re always people come moving in, there’s always people moving out and hence we need to make sure that we keep that flow of inquiries coming in so we can make sure those units are rented right as they’re done being made ready. Now effective marketing starts with an in-depth market research and competitive pricing.

Charles:
So inaccurate rental pricing usually decreases inquiries and prolongs vacancies, but can also harm renewals. It is not usual for tenants, especially tenants new to an area or tenants in a bind to overpay when they move in. However, after a year when they realize what else is the market has to offer, they probably won’t renew. Number three is create quality listings in a marketing plan. And listings with low quality or minimal pictures are a major turnoff when someone’s searching for sale properties or for rent property listings. And I typically see the mistake made by mom and pop investors. They show a few poor quality pictures of a unit with a previous tenant’s belongings all over the place and they wonder why they cannot rent the unit. Or you see a for sale by owner listing for a house which is $500,000. And the seller, you know, they’re trying to save some money and they take the pictures themselves instead of hiring a professional photographer for a couple hundred dollars.

Charles:
And it really shows. And you know, once you complete that renovation of the unit, it’s made ready where you finish all the make ready, take dozens of high quality pictures. Additionally, write a detailed description with all of your tenant screening requirements. Look at newly constructed apartment complex websites and look at all the information in all the pictures that they’re offering to prospective tenant. They’re not putting up someone’s pictures that came off someone’s phone, not saying you need to have a website for a six unit property, but they list everything in those listings when they’re renting ’em, including how close the schools are, the grocery stores restaurants are to the property. I mean, look at something like a really good for sale like an agent listing and you’ll see all the information that they add in there so people know this is exactly what I want and there’s no questions.

Charles:
And it cuts down on people that are reaching out to them that might not qualify. But it also, for those people that you really wanna rent through or sell a property to those, those are the ones that you wanna make sure that they reach out to you and you set up a showing. And either way, they’re very detailed. And the last part of this is having a marketing plan. Now this is much simpler than the sounds you already have the high quality pictures and detailed unit descriptions because you’ve already written those. Now make a list of where you will post vacant units when they are ready to rent and you can now put this all in the cloud and let your VA tenant handle all this. And your virtual assistant can take care of all this when you let ’em know, Hey, we have a vacancy here.

Charles:
And so when you have that vacancy, they have the pictures of that unit and they have the description and they know where and how to post it. And that takes away all that from you and it gets your phone ringing a lot faster. So when that property’s ready, you can rent it immediately. Number four is respond quickly to inquiries and have a streamlined application process. Now when an inquiry comes in online or via phone, make sure someone is there to speak with them seven days a week or reply quickly to their online inquiry. You know, I always set up group showings, splitting people up into 15 minute increments. And this is if you’re not at the property, if you’re at the property, you can show the property pretty much whenever, but if you’re not at the property, you don’t have onsite management. This is something where I send ’em up in groups because you know, most people or many people won’t show.

Charles:
And lastly, I would not share the application link until you have pre-vetted the person. You know, I don’t want people applying and wasting money on applications if they don’t meet your tenant requirements. It’s a waste for everyone. You don’t want anybody writing any bad, bad reviews or doing anything negative because they already paid that application fee. When I’ve turned down tenants, which is very rare that I’ve gone through the application process in some situations, I one time had two tenants that were like applying at the same time and I was, I was new as a landlord and I ended up just refunding someone back what they paid. It wasn’t much money, but it was one of those things where just I don’t want any bad blood, I don’t want any issues. You know what I mean? I knew it was my mistake. I shouldn’t have taken two applications from people like that.

Charles:
And you’ll have some people that put all these applications. Once you find someone, you put ’em through the application, it’s they’re gonna know within hours if the person’s approved or not. You, maybe it takes a little longer if you’re verifying all the income a little bit more manually. But the thing though is that you have a good idea from the beginning who’s going to make the cut, who’s not. And you can just tell people if they really wanna do it, if they’re pushed through it, fine, give ’em the link and they can apply. But what I say is that you’re talking to a couple people, people that really have a high chance of getting approved, you provide them with that link and have ’em go through the process. And I also hesitate to rent to people who have not seen the unit in person. And this is a big thing and I never really thought of it this much.

Charles:
It was something my dad brought to my attention. I think I’ve only done this like once or twice in my life when I self-manage my properties. But you know, once you have a viable tenant, you know, share an online link where they can apply and make sure that it performs a background check. And also make sure that you’re verifying employment and income. And I have to stress this, you know, since COID landlords have been plagued with 10 fraud and that’s usually with identity thaw theft, which you can kind of get around because you go through all these checks and all the information and verifying all these different information through the application process online, that can be done. But the second thing is the employment and income. This is where it gets a little bit difficult, right? Because now you have to figure out a way verifying the documentation is correct that they’re putting through.

Charles:
And this is one of the things where when I speak to property managers today, they usually have some sort of AI screening software. Something where they document software where they can upload the documents into and it tells them immediately if anything’s been altered or if something looks wrong, you know what I mean? And that that’s something that’s really helpful. But the second thing is now you wanna really verify that the person works at that job and for that amount of time and that can be a little trickier. So these are things that you have to do in this, this new age of what’s happening with with tenants and landlords. The next part here is gonna be retaining current tenants. All those different episodes I mentioned earlier in the first half of this episode, those are ones that you want to go back to because those are gonna help you retain those tenants.

Charles:
And here’s some other points that we utilize for making sure that we can keep tenants in our units as long as possible. And the first part of this is responsive maintenance. So when there is an issue, you quickly respond to the tenant and promptly address any repairs, especially when there are emergencies. And this is where this seven days a week comes in when you’re dealing with residential tenants, when you’re renting to them it’s seven days. It’s just like if you were gonna buy a residential house, it’s gonna be odd if your agent’s not working on the weekends or like after 5:00 PM But when you’re servicing a tenant that’s already in there, especially with emergencies, that’s something that you have to take care of them right away. And whatever they inquire, I would say seven days a week, someone responds to them even if they say something that is like, not a big problem, right?

Charles:
Something minor, my blinds aren’t working or something like this. Okay great. And we have someone else on that property in the next couple business days. We’ll take care of those. Much different than if you’re saying that, Hey, my toilet’s leaking. Or like, you know what I mean, it’s on the floor, whatever, it’s, I would always say that you always respond to tenants when they reach out to you for anything right away. And then that’s initially where you’re going to set up their expectations of when that’s gonna be taken care of. Number two is the property upkeep. You know, this is kinda more like when you’re getting to upkeep of the property, but all the common areas as well and outside exterior. So properties require consistent maintenance and upkeep and continually verify the property’s exterior and interior are well maintained. Number three is open communication. So welcome feedback from tenants and provide updates on maintenance issues if there is a delay in fixing the issues.

Charles:
And this is very important when you have like mechanicals out of field like hot water or furnaces. If you’re giving them like an every two hour update of what’s happening, you know what I mean? Like so hot water goes out 8:00 AM on Tuesday or something like this. And you know that you’re not gonna be able to get someone out there, you’re working to find someone there and you’re trying to get someone out there by like Wednesday or whatever it is, or later that day. Give them consistent updates throughout the day. Don’t have them reaching out to you. This lets them know that you’re on top of it and it’s one less thing they have to worry about because obviously there’s people in their household that they have to answer to as well. And they’re kind of, sometimes you, the person you’re dealing with in the household might just be, you know, the person that you’ve spoken to that you rented the apartment to mainly.

Charles:
So it’s one of those things where it makes it easier for their life too when speaking to their kids or their spouse or whoever it might be, that’s gonna be asking them, Hey, when’s the hot water gonna get fixed? Giving them consistent updates. What’s gonna happen? What your timeframe is, is there a problem with the parts? Whatever it might be, letting them know that’s gonna keep that tenant happy and they’re gonna know that in the future they’re gonna say, this is the type of service I want. And most tenants, when you do something like that, they’ve never had that happen before. So they really appreciate it. And I’ve had several tenants that reached out to me and told me they really thanked you for doing that because with previous landlords it never happened. So always be open to communication at all points of your relationship with that tenant.

Charles:
Number four, and this is something that property managers really fail on. I’ve seen before when I’ve been a tenant of other people’s properties, it’s early lease renewal discussions. Don’t wait until the final days of the tenant’s lease renewal period to start the renewal conversation. So I remember when my wife and I, we started living together, we had a, you know, our first apartment that we were living in at that point, we went for like a renewal and they would like drop off the renewal letters. Literally it was a 60 day thing and at least, you know, 60 day window that you had to tell them before moving, they would drop it off like 61 days out. So now it’s the most you’re scrambling because you know, whatever that letter says with the rent increases or whatever it is, if you know you were in a tighter bond or a tighter bind or tighter financial situation, that would make it much harder for you and obviously much more stressful.

Charles:
It’s something you want to avoid if on any part of that relationship, right? If I am the landlord and the property manager, I wanna make sure that I’ve got that person locked in literally three months before their lease is up, right? To make sure everything runs smooth or see exactly what it’s, maybe they’re trying to buy a house and they say, we can’t sign for 12 months, but can we sign for six months? And you say, fine, we’ll sign for six months, then it goes month to month after that, just letting you know rent’s gonna go up 5% because it’s now a six month lease, whatever the number is. And most people are gonna agree to that because it just makes their life much easier. And in that scenario, that’s something for you that you’re gonna know, okay, this cuts down. Because even if they’re not spending, you know, you want to get as many months outta the tenant as possible in your property because that’s gonna cut down on the make ready.

Charles:
Now if you can say, even if they just spend 18 months versus 12 at your property, ’cause they would’ve gone somewhere else maybe and done month to month. Now you have 18 months where you’re spreading over all that make ready costs that you’ve put in and everything else that you’ve invested into that apartment getting prepped for that tenant, it’s now been spread over many more months, which decreases daily cost of preparing that apartment. So that’s really why our goal is really 24 months. If we can hit 24 months, we’ve done well with that tenant. But these are just things that start having that conversation before they eat your tenants. Even think about the renewal because when they start renewing, then they’re gonna get on their phone, they’re gonna get in their computer, they’re gonna start looking at other places, they might tour some places you want to get before all that happens, but you know, the person has to run for the most part, right?

Charles:
Very few people that are gonna just like buy a place right at the end of their first lease with you. You know what I mean? So the thing is, on that renewal, make sure that you’re speaking to them. Talk to them pricing upfront. Don’t be afraid to offer any type of renewal incentives or agree to replace like that stove. That has been a consistent issue and this is a win-win for both a tenant owner. Another thing I don’t understand why people don’t do, if you like have someone has a a fridge that’s literally on the fritz and you’ve sent out a couple people there to fix it and you’re kind of like patching it and you know it’s gotta be repaired, okay? So, you know what I mean, whatever it is, it’s an $800 fridge. Whatever it is that you’re getting for this person, go out, tell them, you know what I mean?

Charles:
You’re gonna put in this a thousand dollars fridge and then you know, if they resign and you’ll put it in like immediately, you’re 90 days out, you’ll put it in in the next, you know, week or two weeks, whatever it is. If they resign now and once they resign, you know, get that order and get that all set ready to go. Don’t wait until the renewal day comes up, do it immediately. And that’s a win-win because now you don’t have to waste someone going out there, you have to pay them hourly. You have to deal with the disgruntled tenant, which is like, you know, all these little things that people are renting because they don’t wanna deal with any of it. So make it better for them. And then they know that’s the one thing that we had an issue with with this property. Now it’s taking care of now we don’t have to do it.

Charles:
Reducing vacancies at your property is really the key to increasing your net income and its value. And many of these tactics take a little time to implement upfront, but they will help you shave days and weeks off vacancies for years to come. So I hope you enjoyed. Please remember to rate, review, subscribe, submit comments and potential show topics at globalinvestorspodcast.com. If you’re interested in actively investing in real estate, please check out our courses and mentoring programs at syndicationsuperstars.com. That is syndicationsuperstars.com. Look forward to two more episodes next week. See you then.

 

Links Mentioned In The Episode:

  • SS74: What is the Difference Between Physical and Economic Vacancy
  • SS151: Understanding Vacancy and Make Ready Costs
  • SS230: High Return On Investment Renovations

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