The realities of when you start acquiring more units - unexpected vacancy

[Alan Asriants]

There is a harsh Reality when you start acquiring more units to your rental property portfolio. That reality is unexpected vacancies. When you own a couple of units, the odds of there being unexpected vacancies that overlap each other are usually low, but when you acquire more and more real estate, the odds of tenants moving out around similar times increases. 

Here is a real life story of what recently happened in my portfolio.

I received a 60 day notice that my apartment was going to be vacant starting December 1st. This apartment required a cosmetic renovation that is going to run me around $27,000 to redo. Of course there is upside to this as I can charge more rent but the property being vacant for two months also is it going to cost me around $1200 in mortgage payments as well.

Another unit of mine unexpectedly went vacant beginning of the New Year. Luckily this apartment just needed touch up a cleaning. Still, this is a poor time in the rental season and 1 months rent can be expected as a cost of vacancy (in addition to the cost to clean and touch up - $900) .

Finally and I hope this is is the last one lol - Another tenant is moving out Jan 31st and this unit also requires a full cosmetic rehab. This is another $27k or so in renovation costs.

In summary 3 vacancies is costing me almost 60k. This is a reality of investing in RE. While very lucrative - if you don't have enough reserves, it can really break the bank. 

[Greg Scott]

This highlights why it is also important to manage lease-end dates.  While you may always have a skip, early termination, or eviction, spreading out the lease-end dates can help avoid having all units vacant at once.