The Ins and Outs of Occupancy Rates: Everything You Need to Know
Renting a house or an apartment is easier said than done. Despite the regular complaints of the crowd that there are no good apartments to rent, there are many buildings that go unnoticed. And you can spend an eternity trying to understand what’s wrong, but there is a 50% chance that you will never figure it out. In a world where homeowners are constantly trying to attain full occupancy, it’s more important to shift focus towards the occupancy rate. Occupancy rate is the number of units leased divided by the total number of units in a property. For example, if there are 100 units available in an apartment complex and 90 of them are occupied, the occupancy rate would be 90%. The occupancy rate is important because it provides valuable insights into how well a property is managed.
Shifting your focus from full occupancy to occupancy rate:
If you have been in this business a while, you know very well that it’s incredibly difficult to attain full occupancy all the time. This is because people are always moving in and out of apartments, houses, and even entire cities. So as a property owner or manager, it’s important to focus on the occupancy rate rather than full occupancy.
But that’s not to say full occupancy is a bad metric for measuring success. If a property has a high turnover rate, then full occupancy might be a good metric to focus on because it would indicate that the property is in high demand.
Why should occupancy rate matter to real estate investors?
One of the primary reasons real estate investors love occupancy rates is that it gives them an idea of the expected cash flow from the property. For example: If an apartment complex has a current occupancy rate of 80% and the monthly rent is $1000 per unit, the total monthly income from rents would be $800,000.
Another reason why real estate investors focus on occupancy rates is that it allows them to compare properties side-by-side. For instance, two identical properties in different locations could have very different occupancy rates. And this would give the investor a good indication of which property is being managed more efficiently.
The logic behind why the occupancy rate is preferred is simple. If an investor buys a home with low occupancy rates, s/he has to spend additional money to find tenants. On the flip side, if an investor buys a property with high occupancy rates, it often indicates that the property is well-maintained and tenants are happy with their living situation.
What does it mean for tenants?
It’s not just the investors who benefit from understanding occupancy rates. For tenants, it’s important to know the occupancy rate of a property before signing a lease.
The main reason for this is that it will indicate how easy it is to find an apartment or house in the area. If the occupancy rate is high, it suggests that more people are looking for homes than there are homes available. This means that you might have to compete with other tenants for the same unit.
On the other hand, if the occupancy rate is low, there are more homes available than people looking for them. In this case, you would have a better chance of negotiating with the landlord for a lower rent price.
What’s a good occupancy rate?
The answer to this question depends on several factors, including the property’s location, the type of property, and the amenities offered. For example, an apartment complex in New York City will have a higher occupancy rate than one in Omaha because more people are looking for places to live in NYC.
The type of property also matters when it comes to determining what’s a good occupancy rate. For instance, apartments typically have higher occupancy rates than single-family homes because there are usually more people looking for apartments than homes.
Finally, the amenities offered at a property can also impact the occupancy rate. For example, a property with a swimming pool will have a higher occupancy rate than one without a pool because people are looking for places that offer certain amenities.
What’s the best way to increase occupancy rates?
The answer to this question depends on the factors mentioned above. If you’re trying to increase occupancy rates in an apartment complex, you might consider offering discounts or promotions. You could also try renovating the property or adding new amenities. If you’re trying to increase occupancy rates in a single-family home, you might want to try lowering the rent price or improving the curb appeal.
Occupancy rates are important for both real estate investors and tenants. Understanding what occupancy rates mean and how they can impact your decision-making is important. If you want to invest in a property, make sure you know the occupancy rate. And if you’re a tenant, use occupancy rates to your advantage when negotiating rent prices.