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chutta: I had 0 vacancy for five years, starting with 1 property and finishing with 6...
Then, I got utterly clobbered! 4 vacant at once, 2 broken airconditioners, and an eviction in process...
vacancy, maintenance, hassles galore sometimes.. ALL have to be factored in...
Exactly. I have a hard time understanding how... I think its because of the constant appreciation over the "glory years", but I can't understand not factoring in the risk of everything you mentioned.
Hi! I'm from Australia and considering investing in the USA, and I must say I'm staggered that you still only do rentals by calendar months. Rental is paid on a weekly basis here, but rentals can start any day of the week. So you can start and finish a rental period on any day of the week. If someone moves out on April 30, your next tenant can move in on, say, May 3. Our market manages to achieve greater than 95% occupancy; I'm amazed that the USA hasn't adopted a similar method!
And I'm not knocking the USA - there are plenty of other things that you do differently that are better, but this stands out as an inefficient way of doing things. It means you almost certainly have to have a month's vacancy every time you change a tenant, instead of only a couple of days.
Food for thought?
ozperp,
I think you are misunderstanding the post. Yes, most long term rentals are calculated on a monthly basis, there are short term rental places and they do run a higher occupancy, but they also run a higher cost to operate.
I guess my question would be... on your less vacancy units... what is the average term of the rental? that is how we can compare if they are a similar rental. usually when we are talking about rentals we are talking minimum 3-6 month rental. is that what you are getting with these shorter term rental?
My analysis takes in vacancy rates...usually I use the average vacancy rate for the area plus 1%. However, as azrob pointed to...I "pay myself" for my time spent on property management. That helps give me an idea of the 2 sources of income on the property...the management, and the passive income.
ozperp
Shore properties do a weekly basis on rent, but usually not "first home" type of residence. We do have places in the U.S. that do weekly based rentals, they (most of the time) are motels in depressed areas. NOTE: I wouldn't just turn that down right away, as long as I can work in high payments for property management. I'd also assess the risk of damage or loss as well, and carry some damn good insurance.
Patrick:
Your spreadsheet sounds interesting. I have something from now defunct green point for commercial lending. Is this something you can share or is it proprietary?
Greg Z
... and, it's free and anonymous
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0% vacancy is not an acceptable number
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Caleb Yamanaka, "CHUTTA"
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I've read and responded to a few threads and need to comment. When looking at single family residence from an investment perspective you need to have a vacancy rate that is minimum 9% (just over 1 month out of 1 year), because you need to add some risk in your investment. Residential rental doesn't work in a perfect vacuum and eventually it will have a vacancy and failure to consider that vacancy in your evaluation will kill you down the line.
I use 10-15% vacancy which is still a little aggresive, but you need to have some consideration for vacancy when considering single family residence as an investment.
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