Renting out your house can be a great financial decision, as rental properties are a great way to earn a stable passive income with little work.
However, landlords should beware of long vacancy periods. Whether it’s because your tenants had to break the lease early, you rent month to month, or you haven’t found new tenants after the previous long-term ones left, you’ll experience vacancies in your rental from time to time.
If you’re unable to fill your vacancies quickly, you could potentially lose a lot of money. Vacancies don’t only mean a loss of rental income, but also leave your property more vulnerable to risks such as theft, property damage, and compliance challenges.
In this article, we will explore the biggest risks associated with having an empty rental property and the best ways to keep your investment protected when it’s vacant.
Financial Losses
The most immediate risk of having a vacant rental property is the loss of rental income. After all, a property that sits empty generates no revenue.
Getting your property back in shape to attract new tenants can be rather costly, leaving you with a negative profit from your investment. If you’re a full-time landlord, dependant on your rental earnings, this can significantly affect your personal finances.
Luckily, landlords can minimize this risk by setting aside a portion of their rental earnings this month.
A good rule of thumb is to save at least six months of your usual expenses in a backup fund. This way, you’ll have a financial buffer in case you ever have to deal with long periods of vacancy or other emergencies.
Property Deterioration
Maintaining a rental property is hard as it is. But keeping a vacant rental in good condition can be even harder. Without tenants to report maintenance problems promptly, you run the risk of small issues escalating to big, costly repairs. Water damage, pest infestations, and mold growth are just a few examples of the problems you can encounter on a rental that has been vacant for too long.
One of the best ways to ensure your rental remains in good condition, even when it’s empty, is to conduct regular property inspections. A simple inspection can help you identify and address maintenance issues promptly. This will not only help you avoid dealing with big repairs but can also grow the value of your property over time.
Security Threats
An empty house is an easy target for burglars. Without the deterrent of regular activity within the house, vacant properties are far more vulnerable to break-ins, property damage, squatters, and even vandalism.
Even if you think your rental will be safe because it’s completely empty, it’s not. Everything has a value, and thieves can take building or maintenance materials, or even cause their own damage to the property.
However, you can reduce the risk of break-ins by investing in quality security measures. Effective alarm systems, motion-activated lights, and sturdy locks will deter criminals from entering your property. You could even hire a service to install property-wide security for you.
Additionally, it’s a good idea to have someone keep a close eye on your property to ensure there’s nothing suspicious going on. It can be a neighbor, a friend, or even a property manager.
Higher Insurance Premiums
Most insurance companies view vacant rental properties as bigger liabilities. The higher risk of property damage and break-ins typically leads to increased insurance premiums.
Having to pay more for insurance can negatively affect the return on your investment in the long run. Some companies may even refuse to cover properties that remain vacant for extended periods.
It’s important to have insurance that will cover your property even when it’s vacant for long periods. If you struggle with long vacancies, you should consider obtaining a vacant property insurance policy. These policies are specifically designed to cover the unique risks associated with empty properties and can save you a lot of money in the long run.
Negative Impact on Property Value
When your rental property sits empty for long, it’s more vulnerable to property damage, required repairs, and break-ins. This can negatively affect the value of your investment.
But keeping your vacant rental in good condition can be time-consuming and expensive, especially if you’re not able to find new tenants quickly.
Luckily, there are plenty of things you can do to maintain and even increase the value of your real estate investment over time. Regular maintenance, keeping up a good curb appeal, or even occasional renovations will not only help you keep your property in good condition but also fill your vacancies faster.
Compliance Challenges
In some states, local landlord-tenant laws or even homeowner association guidelines stipulate specific requirements for maintaining a property, even if it is vacant. Failing to comply with these regulations can result in fines and even legal disputes.
To avoid these issues, you must understand your local rental laws. This will help you ensure that you comply with your responsibilities as a landlord, even when your property is vacant for long periods.
Difficulty in Finding New Tenants
A rental that has sat empty for too long can drive renters away. Potential tenants may associate a lack of occupancy with other problems, such as the property being in bad condition or the neighborhood being unsafe. Even if it’s false, this negative perception can make it harder for you to attract quality, long-term tenants and may even impact the property's resale value later on.
If your rental is ever vacant, it’s crucial that you market it straight away. This will increase your chances of filling your vacancies quickly. Effective rental property advertising strategies include taking high-quality photos of your rental, writing a detailed property description, and running ads on social media for higher visibility.
Bottom Line
While rental properties can be a lucrative investment, the risks associated with long periods of vacancy should not be underestimated. An empty rental can often lead to financial losses, property damage, a lower property value, and an inability to find new tenants.
Luckily, landlords can mitigate these risks with measures such as preventive maintenance, enhanced security, and regular property inspections. Now that you know this, you’re better prepared to keep your investment protected at all times.
Do you have a vacant rental in Silicon Valley? Contact Action Properties, Inc. today! Our team can help you with property maintenance, rental property marketing, and tenant screening. With us by your side, you’ll be able to fill your vacancies in no time!
Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.