Updated about 9 years ago on . Most recent reply
Minimizing Vacancy (risk) and Protecting Portfolio?
Edit: Unsure if this is best suited in Starting Out, or Investor Psychology...
My wife and I are pretty new to this whole thing, and we have a lot to learn. We currently have 1 unit and it's working well for now.
As we expand, I'm aware that vacancy is not my friend. The Buy/Hold calculator factors that in, but I realize that's "average". It doesn't account for national-level issues, such as the bubble and resulting crash back on 06/07 where unemployment spiked. On one hand, a ton of foreclosures (should) address the vacancy issue since people need a place to live. On the other, the foreclosure tanks credit and could cause an applicant to not pass a pre-screen process.
As an investor, how do you protect against that sort of scenario? I know some investors got out before hand, and that's one way, but what if you stay in? The first thing that comes to my mind is to reduce expenses and bring the P+I down as much as possible to reduce overhead and provide a cashflow buffer. What happens to your business if 20, 30, 40% of your portfolio is suddenly vacant? Especially if you have a smaller portfolio and any unaccounted vacancy really hurts?