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Your Rental Property Guide: How to Understand the Occupancy Rate

If you're a landlord, whether you're aware of it or not, your occupancy rate is one of the most important metrics used to measure your success. Of course, you know that the more tenants you have—and the longer you have them—the better things are for business. But there's a little more to occupancy and vacancy rates than only that.

When you're making business decisions—where, when, or how you should be investing your money—you can use an occupancy rate to guide you in the right direction. It's a helpful metric for many reasons. So it's a good idea to get to grips with it.

If you want to learn how to better understand how to calculate occupancy rates, and how these calculations can help you, this guide is for you. Read on for all of the important details.

What Is an Occupancy Rate?

Simply put, your occupancy rate is the percentage of occupied properties you have at a given time. Calculating it is relatively easy. 

Take the total number of occupied units you have and then divide that number by the total number of properties you have available. Multiply your answer by 100, and that's your occupancy rate.

This percentage is an indicator of many different things and is important for landlords to keep track of. For one, it can affect your rental valuation, but that's not all.

What Factors Can Affect Occupancy Rates?

If you're looking to invest in property in a particular area, you'll often look at the average occupancy rate for buildings there to give yourself an idea of whether or not it's a sound investment. But you should be careful when doing this.

Occupancy rates can vary greatly from neighborhood to neighborhood and even sometimes from building to building. So, what are some of the factors that can affect occupancy rates?

To answer this question, put yourself in the mindset of potential tenants there. How affordable are the units? How well maintained are they?

Are there good amenities in the area? Is there a lot of crime? All of these factors can have an impact on occupancy rates and should be taken into consideration.

If you see an area with a low occupancy rate, ask yourself why that is. Then ask yourself if the issues are things you can remedy.

Maintaining a High Occupancy Rate

Of course, your goal will always be to maintain as high an occupancy rate as you can. You will also want to have as little tenant turnover as possible and make your vacancy periods as small as possible.

There are several things you can do to ensure this is the case. Keep the building well-maintained, and respond to tenant requests and complaints promptly.

Streamline the tenant screening process, so you're not waiting weeks to fill an empty apartment. Also, make sure the tenants you do pick are reliable and punctual with their payments.

Become the Best Landlord You Can Be

A lot of work goes into maintaining a high occupancy rate for your properties. A property management company can help with all of the above tasks and help to keep your occupancy rate where you want it. Get in touch with us today to see how we can help you make more savvy real estate-related decisions.

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