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5%Understanding vacancy lossVacancy loss occurs when the unit is empty or vacant and unable to earn an income nike basketball shoes. A unit can be vacant because of the rental climate, the unit itself needs renovation, or your property manager is unable to market the property appropriately to keep it full. In the current economic climate, the national vacancy rate is now 11% up from 7%, units are simply, due to market conditions, taking longer to fill air penny 5. Your property manager tells you that it will take $500 dollars to make your unit ready for a new tenant. Fortunately Bob left a $400 dollar security deposit which will be applied against unpaid rent, but you balk at paying $500 dollars to have the unit fixed up and ask your property manager what is the minimum that you can do to re-rent the property lebron 10 shoes. He suggests new paint at a cost of $150 dollars and a cleaning at a cost of $75 dollars but tells you you will have to re-rent the unit for $550 because the unit has to be in mint condition to rent for $600. The difference between the $600 dollars you could get and the $550 you will get for going cheap on the make ready is called a market loss foamposites for sale.Understanding Market LossThere are several reasons that a property will rent for less than it is generally worth. Soft rental market. As vacancy rates go up, rents often drift down eroding some of the value of a property.The owner wants to keep the property full and will rent each unit for less than market value to do so.Ignorance of the market value of a property.failure to keep a property in good condition.Market losses are important because under-renting a unit has long term implications for the value of the property. Remember that a rental property is really only worth a multiple of the gross monthly rents. Under-renting then will affect long term value for the negative.At the start of our example, our unit is worth about $72,000 in the market place. That is $7200 dollars times 10. In Month 3.5 the unit is re-rented for $550 and stays rented for the remaining term of the original lease, 8.5 months. The total rental income collected during that time is $4675. The total income for the 12-month term is $4675 + $1200 + $400 =$6275. The yearly loss is 13% or $925 dollars. The losses break down as follows:$200 dollars collection loss this is because the owner was able to apply the $400 dollar security deposit against unpaid rent.$300 dollars vacancy loss$425 dollars market lossNotice in this example that the greatest dollar loss was caused by the property owner who chose not to spend $275 dollars in order to fix his unit up to bring it to market rent.
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