What is Vacancy Rate?
The term “Vacancy rate” is a term that you’ve probably heard in passing or in a discussion if you are a St. George property manager. Many people don’t know what it is, what it means, and why it’s important to be aware of. Let us explain. To put it simply, the vacancy rate is a stat (usually a percentage) that allows those interested to know what kind of demand there is for rental properties in a given area. Using certain metrics, it makes clear what kind of rental activity is going on in an area. It does this by, as you can probably guess, providing a very accurate count of vacant properties. You can get vacancy rates for any area of interest by going to a variety of websites, including www.census.gov, www.apartmentlist.com, and www.bestplaces.net as well contacting local property management or city offices. The calculation method is intricate so we won’t bore you with all of those details, but you can search the internet for how vacancy rates are calculated if you feel so inclined.
Basically, when a vacancy rate is high in a particular area (typically above 3%), that typically can mean one of two things (or both): (1) that a prospective St. George property manager should be wary of investing in that area because other property managers are having a difficult time finding tenants, or (2) that there are in general a high number of available rentals that would be competing with your potential purchase.
These two realities almost always go hand-in-hand. An area experiencing this kind of low vacancy rate is sometimes referred to as a “renter’s market”. And on the other end of the spectrum, when a vacancy rate is low in a particular area (typically lower than 3%), this describes an area that is the complete opposite, meaning it’s an area with very high demand for rentals where landlords essentially can pick and choose their tenants from a stack of applications. This situation is commonly referred to as a “tight market” or a “landlord’s market”.
In high vacancy rate areas, renters and tenants will usually have the upper hand as far as negotiating monthly rent prices and related aspects of the transaction. In low vacancy rate areas, the landlords and property managers have the upper hand and often charge more than they sometimes should just because the demand is so high that people will likely pay it regardless. Knowing vacancy rates can also help the current or potential St. George property manager to predict things like property market busts when large amounts of people are moving in or moving out of the area, and the effects of the creation of new housing or apartment developments. Knowing and predicting these things by looking at the signs provided by vacancy rate numbers can and will give you an advantage over other property managers and competitors in the area.
So, vacancy rates are obviously very important. If you are not even to the point yet where you’ve selected a general area where you’d like to invest in owning property as rentals, knowing the vacancy rates of surrounding areas and looking at them as a whole can often be the catalyst you need to select the smartest area for you.
Now, there are some things that knowing vacancy rates will not result in, and one of those things is what type of properties you are dealing with. In other words, vacancy rates do not separate apartments from townhouses from standard homes, and so on. The number will be all-inclusive. Make sure to ask around to get even more accurate information. Consider contacting the big property management companies (or individuals) to collect even more research.
Now you can say that you know what vacancy rates are. Get ahead of the competition and get yourself informed so that you can be the most successful St. George property manager possible!