Saturday, January 22, 2011

Zero Down Time

Eric and I attended a seminar recently by David Tilney. One of the amazing ideas I came away with was to, at least try, not have any time that the property is not collecting rent. Down time is expensive and is irretrievable - once a foregone rent dollar is gone it is gone for good.

Obviously the first goals should be to choose tenants that will stay for very long periods of time and find ways to encourage them to do so. But at some point it becomes inevitable that a rental home will "turn."

The first critical step is to get at least 3 months notice of a tenants intent to vacate. Include a provision for 3 months notice in their lease, requiring a renewal lease is signed at least 3 months in advance to the termination date AND tickler to check with the tenant at that time.

Second, provide incentives for the tenant to work with you to effectuate your goal. At the very least, know the cost of a "turn" is a month's rent. Factor in the costs of renovating the property, a rental agent fee, advertising and the possibility it will take more than one month to find a qualified tenant. Perhaps start with a 1/4 of that cost you won't have to incur.

By having extensive pictures of the home, at its best - i.e. when it is occupied, furnished, fresh, clean and on a beautiful sunny day, you can more effectively advertise the property and generate serious enough interest so interested prospects will fill out applications and get pre-qualified before you have your existing tenants show the property to them. Yes, they should be showing the property for you - they are motivated to sell it for you aren't they?

It is critical your existing tenants know that to get the extra fee, they need to show the property, help get the property ready (i.e. allow your painter and/or other maintenance people to do what they have to do to effectuate your zero down time goal.

Here are some useful articles on tenant turnovers in these articles:

Please post your ideas about maximizing property cash flow by reducing tenant turnover or making it more efficient.

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