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How to Improve the Occupancy Rate of Your Rental Property

Jerry Norton

Jul 18, 2024

bird's eye photography of red and orange houses

As a landlord, there are many formulas that can help you maximize your rental business. This includes loan to value ratio, GRM, net operating income and more.   

Did you know there’s a formula that can put a percentage to the number of units rented out that acts as a key indicator of the health of your rental business? 

I’m talking about occupancy rate. 

If you're not already using occupancy rate, I highly recommend that you keep reading (especially if you're a landlord with multiple properties) because it helped me realize the true health of my rental business, and most importantly, helped me improve it.

In this article, I'll break down everything you need to know about occupancy rate, and above all, how you can improve yours now and in the future.

What is Occupancy Rate?

Occupancy rate is a measure of how many units in your rental property are occupied at any given time, expressed as a percentage. 

High Occupancy Rate vs Low Occupancy Rate

A high occupancy rate indicates that most or all of your units are rented out, while a low occupancy rate suggests that costly vacancies are occurring.

How to Calculate Occupancy Rate

It's a simple formula, really: occupancy rate is calculated by dividing the number of rented units by the total number of units in your property and multiplying by 100.

For example, if you have 20 units and 18 of them are rented, your occupancy rate would be 90%.

What a High Occupancy Rate Means

Every landlord wants an occupancy rate of 100%. If not 100%, as close to it as possible.

Why?

A high occupancy rate ensures a consistent income stream, allowing you to cover your expenses, including mortgage payments, maintenance costs, property management fees and more.

A high occupancy rate also contributes to a positive cash flow and maximizes your return on investment.

But that's not all. A property with a high occupancy rate can be seen as desirable, attracting other tenants, and reduces the risk for vandalism often associated with vacant properties.

How to Increase Your Occupancy Rate

So, if you have a low occupancy rate, what can you do?

The good news is that there are several ways to improve it, including:

Pricing Your Rental Property Correctly

If you can't find tenants, ask yourself if your rental property is overpriced. Look at the rent prices in your city and your local neighborhood, comparing them to your property.

If rent is too high, it can scare off potential tenants, while rent that is too low will reduce the amount of income you should be earning.

There's always the option to include incentives, such as discounts on long term leases or referall bonuses to help attract tenants.

Improving Your Property's Appeal

Another way to attract tenants and improve your occupancy rate is to boost the overall appeal of your rental property.

After all, tenants are more likely to choose a property that is well-maintained, clean, and visually appealing.

Find affordable ways to do cosmetic repairs, such as fresh paint, landscaping, or updated fixtures.

I'll be the first to tell you that enhancing the interior and exterior appeal of your property can also make a significant difference in attracting tenants.

Offering Competitive Amenities

Amenities can play a significant role in attracting and retaining tenants. Are there any affordable amenities that you may be lacking, whether it's a washer and dryer, or even pet friendly policies?

Going the extra mile to offer amenities can be costly at first, but in the long run, may result in a long term tenant that outweighs the investment of the amenities.

The Bottom Line: Occupancy Rate

Occupancy rate is a simple real estate formula that can be used to determine the true health of your rental portfolio.

From my experience, putting a percentage on your occupancy rate can really drive home whether things are going well or if your business needs help.

If you have a low occupancy rate now or in the future, use the strategies in this article to boost it so that you and your business can experience the ROI you deserve.