Over the next couple of posts, I'd like to consider some aspects of proactive management as well as look at the topic of qualifying tenants. These are basic landlord skills, but we can all get lax and not pay enough attention to what we're doing. When we fall into that trap, we pay in other ways, like unwanted turnovers.
Currently the Austin area has a rental vacancy rate of right at 4%. There's a lot of transition going on, particularly in the downtown university areas. Students are leaving from the spring term or staying on for summer. But, even if you're not renting to a student, this is a good time to highlight a couple of things either you or your management should be doing.
About 90 days out from the expiration of the lease, contact your tenant. You have a couple of goals in mind. First, you want a blood pressure check. Are they staying on? What are the pros and cons of the place? And second, you want to eye the market rents and see if it's time for an adjustment. For instance, you might tell your client the market rents on comparable units are at $1,000 and they're just paying $900. Can they meet an increase? Start at $100 and negotiate. You don't want a turnover, but you do want to keep your rents as close as possible to market.
Turnover is one of the biggest expenses we incur in managing and owning rentals. The management companies make money from the make ready and the new leasing fee, but we, the landlords, take the hit. That's why it's important to be pro-active and know your tenants. If you have a sense of what they like and dislike about the unit, you may be able to come in and offer services that in their mind makes a rent increase more palatable. Replacing a cranky appliance or cleaning the carpet is much less expensive that a turnover.
When a tenant does decide to leave for what ever reason, know what your competition is doing. Take the time to go see other available units in your area. Have they upgraded fixtures and appliances? Have they put in new flooring? After comparing several units in your market area, you may find out yours is getting a little shabby. The best looking unit is the one that is going to rent. If you need to spend extra money to upgrade a few features, do it.
I can't stress enough how important it is to be proactive as a landlord, including monitoring what your management company is or is not doing for you. Anytime you do lose a tenant, you're looking at qualifying someone else to assume the space, which is what we'll talk about next week. Consider this your little spring refresher course in Landlord 101. And, as always, if you have questions, ideas, or stories to share, please use the comments. I'd love to hear from you.