Most investors understand that over years of ownership of residential rental property, they are likely to experience vacancy at some level. But some landlords incur more vacancy than others. What is ‘reasonable’ vacancy and how does an investor ensure they maintain vacancy at or below this level?
Experienced residential property owners have found that a reasonable balance between supply and demand is struck at a vacancy rate of approximately 3% – or 10 – 12 days out of a 365-day year. A landlord who incurs more vacancy than 3% is likely to be in a tenants’ market where it is prudent to be more negotiable about rents and improvements to the property. In a market where the vacancy rate appears to be less than 3%, a landlord is more likely to be able to hold out for higher rents.
Landlords who are sensitive to market changes and realise that the longer a property is vacant, the more the market is indicating a reduction in the advertised rent tend to experience less overall vacancy and subsequent higher income from their rental property.