One of the biggest expenses for rental properties owner is a vacancy. While the property is vacant, you still have to pay the mortgage (if you have one,) property tax, insurance, and utilities. Also, since it is vacant and there's no one to let you know if there's an issue, you probably have to stop by every so often to make sure that there is no vandalism or leaks. So how can we minimize it?
Let’s think backward here. Imagine the new residents are moving in on July 1st. The property needs to be clean and empty, and everything needs to be in working order. Is that even possible? To do that, you want to have the maximum time between the old and new residents. How do you do that? Let’s think about what hotels do. When you book a hotel room for one day on 7/1 for example, you can not walk into the room at 1 am on 7/1. You might have to wait till 4 pm to get into the room. You also can NOT stay at midnight on 7/2 in this example. You may have to be out of the room by 11 am. So you essentially booked a one-day stay, but you may only be allowed to stay in the room from 4 pm till 11 am. This is so that the hotel has enough time to get ready for the next guest.
You can do a similar thing to your rentals. You can have not only the lease expiration date but also the time. For example, the lease might end on 6/30 at 10 am. At the same time, you can have not only the lease start date but also the lease start time for the next resident. For example, the lease may start on 7/1 at 4 pm. This way, you have 30 hours to get the property ready.
But some of the repairs may take more than 30 hours. For example, if you have to replace the carpet, you may have to get a vendor in to do the measurement and order the carpet a few weeks before the move-out date, so that you can schedule the carpet installation during that 30 hours. This means that you have to do a walk-through a few weeks before the lease end date.
One more thing. There’s no good to have a perfect property ready when there are no residents lined up to move in. That means you have to do showings while the current residents are getting ready to move out. Some landlords incentivize the current residents so that they will keep the property in good shape and hopefully not say anything negative about the unit.
So, to recap, if everything goes well, this is what you will do.
- Have a lease agreement with not only the date but also the time to give you the maximum time to get the unit ready between residents.
- Do a walkthrough a few weeks before the move-out so that you know what needs to be fixed/replaced/repaired if any.
- Start advertising and do showings while the current residents are still living.
- When the current residents move out, get the unit ready for the next residents.
If you are reading the above and starting to have a lot of questions or feel uncomfortable, you are not alone, as I feel the same way.
Let’s start with putting time to the lease. That’s the easy part, but what if the residents do not move out at the time on the lease? Maybe the moving truck did not show up. Maybe the place they are moving to is not ready. I can think of many more reasons why the residents may not move out on that day. Now, what do you do with the people that you lined up to do the cleaning, repairs, etc.? The next day comes, and the residents are still there. Meanwhile, the next resident comes to the property with a loaded truck ready to move in. What do you do now? Yes, the current resident is violating the lease, so technically you can start the legal process (check with your attorney on this,) but would you? Even if that’s the way you want to go, you won’t be able to solve it in a day or two.
Next problem. You set up a walkthrough so that you know what needs to be repaired/replaced. But can you tell what all the issues are? What if the carpet looks perfect, but when you go in after the resident moved out, there are holes where the couch was? Or maybe some damage occurred after the walkthrough. It’s too late to arrange for someone to repair/replace it. Meanwhile, the next resident is ready to move in.
Next problem. When the current resident is getting things ready to move out, there are so many things that need to get done that keeping the property in shape and letting the next potential resident see the unit might be the last thing the current resident is interested to do. That means you potentially lose out on good residents because the property is not ready to be shown. Also, there might be a legal issue if the current resident starts acting like an agent and start showing the unit. *I’m not an attorney so please consult with your attorney for any legal advice.
Next problem. So everything is working perfectly so far. The old residents moved out. There are no surprise repairs to the unit. The next resident is lined up to move in. But…
Where is the cleaning crew? You call the company, and it turned out that someone got sick, so they are shorthanded and can not come to clean the unit. Not only that, there is some mix-up with the carpet order, so that dirty carpet can not be replaced, even though that’s what you promised to the next resident.
What do you do now? The answer is, I don’t know. And that’s why we don’t have residents move in the very next day that the current resident moves out. Too many things can go wrong, and if it can go wrong, it will eventually. No one likes to just hold a property with no rent coming in, but that’s much better than trying to figure out the issues I mentioned above. In my opinion, it’s a small price to pay.