How Do We Quantify the Cost of a Vacancy
What is the cost of a vacancy?
(This article was updated in March 2022 to reflect updated national data)
Vacant properties are an issue because of the obvious loss to your monthly income, then after adding in other expenditures to maintain and insure the property, that number added up over time can escalate damage in a homeowner’s pocket.
In 2020, the U.S. national average rent for a one-bedroom apartment was $1,164.00. That number increases with the number of bedrooms, bathrooms, and the location. In the southern states the average rent for a two-bedroom apartment is around $1,700, with a three-bedroom property’s rent going around $1,835.
Vacant properties are more likely to be vandalized and insurance companies know this. Most insurance companies will not insure a property after 30 days of it sitting vacant. In order to protect your home, you as the owner will have to get vacant property insurance which is much more expensive than homeowner/landlord insurance. This number might be upwards of $180 each month!
Considering the cost of the average vacant rental property could easily look like this:
- Average monthly rent: $1,164
- Property tax: $205
- Vacant property insurance: $180
- Utilities: $171
- Lawn care: $126
- Total Monthly Expenses: $1,866
Other Additional Expenses:
- Move-out cleaning services: $360
- Carpet cleaning: $120
- Window cleaning: $80
- Oven cleaning: $15
- Total One-Time Costs: $575
These numbers are average, and this is before figuring in the absence of rent that a resident would typically be paying you each month.
Adding up the first month of expenses (before needing vacant property insurance) $702, the cost of rent you’re no longer getting in monthly revenue $1,164, and the additional expenses of $575, totals to a grand $2,441.00.
That’s almost $2,500 lost if the unit is not filled within 30 days!
After one month, the monthly expenses (with the vacant property insurance) $1,559 plus the loss of the typical monthly rent (the U.S. national average) $1,164, totals to $2,723. That’s just $30 less than the first month!
The daily cost of a vacancy:
To get a further glimpse of the reality of what vacant properties can cost, the first month’s grand total of $2,723 broke down to the total cost per day is $87.83.
The bottom line is nobody wants a nearly $100 bill leaving their pocket every day. To negate this, it’s critical that you shorten your turnover time to ensure no vacancy gaps. Read our blog ‘What is a Rental Turnover and the 3 Effects of Poor Processes’ to learn more!
Written by Kyle Graves