10:26 AM, 4th February 2011, About 12 years ago 6
A one month rental void accounts for 8.33% of your annual rental income. For many landlords this is the difference between making a profit or a loss from rental income. Talk to any property investor who’s had problems making mortgage payments and there are two main reasons; 1) no rental income or 2) no cash reserves. Rental voids must, therefore, be avoided at all costs. In this article I outline several of the effective strategies I’ve adopted since I began letting properties in 1989.
Please remember that my properties are all mid range to upper end of the market. My typical tenant profile is professionals and retired couples. Some of the strategies outlined may be transferrable to other market sectors but not all of them.
I will explain how I keep my rental voids to an absolute minimum in detail further into this article but here’s a very quick summary:-
Establish market rent
I look at Rightmove.co.uk. Very simply, I enter the post code and look at all properties within a half mile radius. I always tick the include “Let Agreed Properties” box. I make a point of speaking to the agents and asking what the property let for. Occasionally they are guarded with this information but more often than not they are very open as they want my business. I’ve become very accustomed to listening to their sales pitches. Well worth it though to get a feel for the market. Occasionally I view their listed properties to fully understand what I’m up against. This affords an opportunity for me to sell mine over the competition.
Check rental demand before I buy – pre-advertising
If I’m seriously looking to buy in an area I will look at every property for sale to establish the real values. I will ask all vendors how many properties are already let in the area. I will make a note of their selling price, calculate the cost to refurb to my standards (all of my properties look very similar internally) and work out the bottom line with them. This enables me to negotiate a decent price and to make sure I’m getting the best possible deal. If I’m on the verge of doing a deal I will ask the vendors if they mind me advertising their property to rent before I make a purchasing decision. If they agree I market the property via the internet. I explain to all callers that I don’t own the property yet but I am seriously considering buying it as a long term investment. I then suggest time-scales. I may even arrange viewings (see below). If I don’t get any calls the decision is easy, DON’T BUY. If I get lots of calls the decision is much easier.
Market for £50 less than market rent
Advertising at £50 below market rents maximises the number of leads I receive. I often let the property for more than advertised though – see below.
Arrange block viewings. Be time efficient, organise chaos, create urgency
Most tenants struggle to do viewings in the daytime and so do I. When I started letting property the time wasters were the bane of my life. Nowadays I generally arrange block viewings at 7pm on a Thursday and 11am on a Saturday. If I have an existing tenant in situ I offer them £10 to do the viewings or £20 towards a meal out if they want me to do them – my preference is the latter. I explain to all tenant enquirers that I’m very busy and I only have these two time slots available for viewings. I also explain that demand for the property is very strong so they know to expect to see other people viewing at the same time as them.
Get prospective tenants bidding against each other
Just because I advertise for £50 a month below market rental value doesn’t mean that’s what I achieve. If I have lots of people that want the property and I want them as tenants I agree to call them back the following day. Remember, they’ve now witnessed the level of demand and they will know that my property is £50 below market rental value. When I call them back I play all the ends off the middle, i.e. I explain that I have several tenants interested, I explain this is probably because I’ve under valued the rent and I ask them to make me their best offer.
Agree rent rises in principle before letting
It’s always difficult to know whether to increase rents at the end of a tenancy. Will the tenants move out if you do is always the worry. For this reason I always try to negotiate what the rent will be increased by in 6 or 12 months time. I then contact my tenants two months before the end of the tenancy to see if they want to renew at the end of the term and I remind them at that point of the rent rise agreement. If they want to stay on I repeat this process. If they want to move out we discuss damage deposits, work required and viewings for re-letting.
Incentivising outgoing tenants to cooperate with viewings
As mentioned above, I pay £20 to existing tenants to be out of the property when I do viewings. I also agree to pay them an extra £50 on top of their damage deposit refund if I re-let the property and move the next tenant in within a week of moving them out. This serves several purposes. A) it reminds them that I am holding their damage deposit and that I’m serious about re-letting quickly, B) it incentivises them to keep the place clean and tidy, C) they are far more cooperative with viewings.
All of the above processes generally mean that I rarely have more than a few days of voids between tenancies.
To learn more about my property investment strategy please read the following posts in this order: