No Vacancy: Why You Should Care About Vacancy Rates Again.
Vacancy rates are still relevant, although they may not tell the whole story. I compare it to Earned Runs Average. That used to be what baseball (pitchers) were judged off of, but then it just became a cliché that somewhat lost its importance (seemingly). Well, as time went on, we wanted more explanations for all the idiosyncrasies within the game. That’s when the age of saber metrics was born. Where we developed stats like Wins Against Replacement, Walks and Hits Per Innings Pitched, ect. Despite all this, in 2018, ERA is still a very valued statistic in baseball. The point is, vacancy can in fact still tell you a lot, although maybe not the whole story. Here is why you should still care about that number, especially when looking at a Property Manager.
We are all here for the money, right? This is after all, an investment, correct? Well then let me relate this to you in monetary terms. Vacancy is just lost income, let’s just call it what it is. Let us say that you manage a $1,000.00 single family home, let’s assume (for ease of the example) that there are no expenses associated with it. Over the course of the year, you would bring in $12,000.00, or roughly $33.00 per day. With our vacancy rate of 0.59%, that translates into a cost to you of only (if you were a standalone unit) about $71.00 for the year due to vacancy. Southwest Idaho’s Average Vacancy Rate is 2.3%, this would translate into about $277.00/ year due simply to the vacancy rate, or $206.00 more per year, per unit you own. This compounds very quickly as you add units, but I don’t need to tell anyone that! As illustrated in the graph below, we out perform the industry as a whole in this statistic. Part of this, admittedly, is the wonderful market that we are in right now. Both the SW Idaho and First Rate Property Management have been enjoying the benefits of this (illustrated below).
Naturally, we will not be in this great of a market forever. Like all others, this is cyclical. But vacancy rate is not just a result born out of our high market, it is an indicator of something larger. That is, a healthy company and good customer service. This is why our vacancy rate stays so low over time. The graph below illustrates three important things that I feel are big factors in our success with this metric. Consistency, Efficiency and Honesty. These are why we have low vacancy rate. Other than May and June, we have stayed remarkably consistent in our vacancy rate over the last three years. When they are up for rent, on average for 2018, our units are on the market 13 days. Considering we usually shop them 30 days before they are vacant, most units don’t even see truly vacant time. This efficiently gets units off the market, either by a new renter or by a renewal. Finally, our renewal rate is very high due to tenants really enjoying their experience with us because we do business the honest way. Repeat business is, across the board, a great indicator of customer service.
So next time you see vacancy rate, don’t just scoff because it is cliché at this point. Really ask yourself, how does this relate to my position? How does this affect me? Chances are, it affects you more than you may realize.