How I minimise rental voids

by Mark Alexander

10:26 AM, 4th February 2011
About 9 years ago

How I minimise rental voids

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How I minimise rental voids

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:-

  1. Establish market rent
  2. Check rental demand before I buy – pre-advertising
  3. Market for £50 less than market rent
  4. Arrange block viewings.  Be time efficient, organise chaos, create urgency
  5. Get prospective tenants bidding against each other
  6. Agree rent rises in principle before letting
  7. Incentivising outgoing tenants to cooperate with viewings

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:

  1. The Roots of my Property Investment Strategy
  2. What you shouldn’t do with your buy to let mortgage
  3. How I maximise the returns on my liquidity fund (cash in the bank)
  4. Sell or hold after completing a refurbishment?
  5. Buy to let strategy – in this article Mark Alexander explains the 20% liquidity reserve rule of thumb
  6. What’s more important, cashflow or liquidity? Mark Alexander reports
  7. Is your property portfolio ownership structure optimised to enable you to pay the minimum amount of CGT, income tax and IHT?
  8. The history of No Money Down and Instant Remortgages since 1992
  9. (You are Here) | How I minimise rental voids
  10. How I choose my tenants
  11. How I minimise property management issues
  12. Are YOUR tenants YOUR best ambassadors
  13. Due Diligence
  14. My 1000th post on my favourite property forum
  15. Property management advice
  16. Property investment advice

 



Comments

14:53 PM, 16th September 2011
About 8 years ago

It seems the one of the key parts here is to 'manage' your prospective tenants through the process at the same time. Thus reducing your time commitment and allowing you to extract maximum value for the property.

Contrast this to many letting agents who take viewings in an ad-hoc way, and typically present the first acceptable offer to the landlord. Doesn't drive value, and can also take longer if the agent rushes the wrong tenant through the offer process.

Mark Alexander

15:10 PM, 16th September 2011
About 8 years ago

I completely agree Peter, thanks for commenting, thumbs up from me 🙂

Ian Ringrose

15:58 PM, 10th January 2012
About 8 years ago

Are there any renting
agents that work this way?  It seems very
uncommon for agents to manage rent increase to the benefit of landlords.

 

How to you get prospective tenants to be willing to commit to a property
that is not empty?  

Mark Alexander

0:22 AM, 11th January 2012
About 8 years ago

It is in the agents interests to increase rents Ian, keeps landlord happy and their commissions growing. I'm surprised you're surprised.

I'm away this week and only have my iPhone with me so it's not easy to link you to the page of my strategy blog which details how I intentivise outgoing tenants to help me to re-let. Remind me after Wednesday next week if you can't find it please.

Tony Atkins

9:46 AM, 1st March 2012
About 8 years ago

There are some good suggestions here Mark, like keeping your current tenants sweet while conducting viewings. However I run houseshares/HMOs, so there isn't a clear demarcation line on the end of tenancies - most become periodic tenancies and it is hard to get existing tenants to agree to a new AST when in residence: they like the flexibility of being in a periodic tenancy. One way round this would be to agree a renewal of the AST and a rent review at the very start of the tenancy.

You are in the fortunate positiion of having sufficient demand to be able to block-book viewings of your properties. In my experience prospective tenants have wildly different work hours and can be coming from significant distances on specific days, so it can be extremely difficult to nominate block-booking times without cutting out potentially good tenants. My solution with HMOs is to ask the existing tenants, usually the most reliable/available ones, to conduct the viewings if I'm unavailable. That way the new tenant gets to meet at least some of his or her prospective housemates and hear their honest views, and the existing tenants can form a view about which tenant they prefer; also there's far less pain to me and the existing tenants if there's a no-show. I generally then like to meet any tenant who expresses real interest and whose references check out, preferably at their current address just to see what kind of conditions they live in.

With HMOs one has to get used to a higher degree of "churn" on tenancies, although a mere one-month notice period can leave the landlord sweating and facing a void if demand is patchy. One solution to this is to write a two-month notice period for the tenant into the AST after the six-month initial period expires, using the argument that this is the price for the tenant having the flexibility of a periodic tenancy. I find this generally works well, because even tenants can struggle to find a new place in one month, especially when the HMO market has tightened up considerably over the last year and there just aren't the number of property options that used to available.


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