Property Management Companies Track Days On Market (DOM) And So Should You!
Just how much is vacancy costing you per day?
Read The Transcript Here:
Hi, this is Joe White & this is the Grow Real Estate Investing Podcast.
Today I want to talk about Days on Market.
What days on market refers to is how many days a property has been for sale without finding a buyer
or how many days on the market a rental property has been without finding a tenant.
If you are looking at property for sale or rent in the MLS (The Multiple Listing Service) or on any real estate property sites, you will often see “DOM”.
That stands for days on market and it's usually there because many buyers, and real estate agents believe you can use that as a tool to gauge things like if the seller or landlord might be motivated.
The thought being the longer the days on market is , the more desperate to sell or find a tenant someone will be. As an experienced real estate agent I can tell you it's actually the opposite.
When I see a high days on market number and a property has sat for a while I think “unreasonable seller”.
This person hasn’t accepted any reasonable offer. And very well might not
But that’s a different podcast, for a different day.
For our purposes today we are going to talk just about rental properties & their days on market.
Essentially, just how much vacancy is going to affect you.
Obviously most real estate investors & landlords know that longer days on market are undesirable and they already know they are losing money by the day.
We all know that vacancy is expensive.
But I don’t know if everyone knows just how expensive vacancy is.
As most of you already know, I own rental properties. My wife and I are partners.
But I also own a real estate brokerage and I own a fairly large property management company in Philadelphia, called Grow Property Management.
So vacancy & days on market are pretty much my everyday. At any given day I have vacant properties I need to find tenants for.
Days on market is a metric we track at our property management company fairly closely.
To us it's like one of the things we grade ourselves on for our property management report card.
And we track our average days on market versus all the other property management companies in our market.
We want to know that we have far lower days on market than other property management companies because that’s one of the ways we know we are a better company.
And I also want to be able to look potential clients in the eye when I tell them that we will make them far more money than they ever spend on us.
And having vacancies with very, very low days on market is one of those ways we more than earn our money.
But also, vacancy is very expensive for our client. And this is our job.
Let me use an example of a property that has a market value of $1,500 a month. That means it should rent for $1,500 within a reasonable amount of time.
If we take the $1,500 and divide it by 30 days in a month (Of course some months have more days, some have less. The average is 30.42 in most years I believe; but to keep this clean, I am going to use 30 days.)
$1,500 rent divided by 30 days in a month gets us $50 per day.
So each day that $1,500 rental is vacant is going to cost our client $50.
That’s a heavy penalty for not finding a tenant. That’s more than a parking ticket, here in Philadelphia.
And that is per day. In 4 days we are up to $200.
Now in our market, we beat our competition’s days on market by 21.3 days. At $50 per day that’s $1,065.
And if the rental is $2,300 a month which is just under our average rental price for the properties we manage, it goes up to over $76 per day, at 21.3 days that is over $1,618 lost.
My point here isn’t to promote my property management company over others.
Call my business & I will certainly be happy to do that.
I know most viewers of my podcasts are not local here in Philadelphia. If you are seeking to engage a property management company, check reviews; but also check average days on market for each company. $1,618 lost every time a tenant moves out is a very big hit.
My intention is to point something out that I know is taken seriously; but I don’t think it's always taken seriously enough.
I mean, I don’t know if my numbers are surprising to you or not.
I do know it surprises my clients when I break it down for them. So it's something to consider
This is Joe White, with the Grow Real Estate Investing Podcast. Happy Investing!