21:02 PM, 13th August 2012, About 10 years ago 10
As we all know, the landlord’s most dreaded expense is void periods and I am always looking at innovative ways of trying to achieve the “holy grail” – 100% tenant occupancy – 100% of the time.
Renting to DSS tenants (as discussed in DSS tenants – another issue) can drastically reduce our voids but, as your many comments highlighted, DSS tenants do not come without their own unique set of tenancy issues – which are not palatable to large swathes of fellow landlords!
So – how can we reduce our void periods without turning to the DSS?
Large businesses spend a lot of money on customer service to try and retain their existing customers because they have realised that it is more costly to attract new customers than it is to try and please / retain the existing ones. Could this work for landlords? After all – landlords are in the business of providing services (ie: homes) for their tenants aren’t they?
If we provided excellent customer service and focused on tenant retention – could we reduce our void periods? If we could then we would also reduce our marketing costs (and setup charges if we used a letting agent) and, as a result, we would create more profit – wouldn’t we?
Over the past few years I have been trying to focus on the customer service aspects of my buy-to-let business and have come up with the following strategies which have seen my void periods almost totally eradicated.
Maybe they want a more efficient shower fitted in the bathroom. Some landlords would complain about the cost – but a new shower is a lot cheaper than a new tenant and it improves the overall capital value of the property and it is probably tax deductible!
Perhaps the tenant wants a pet. As long as the tenant signs a pets clause making them liable for any damage and pay a slightly higher Security Deposit then I usually say YES (unless they want to keep a Rottweiler in which case I always say NO).
Some tenants would like a TV aerial or a Satellite dish. I always agree to the TV aerial (and pay for it to be fitted) and give permission for the Satellite dish as long a the tenant pays a local TV company to supply and fit it.
My aim, as a landlord, is to retain all of my tenants in all of my properties for life!
I know this is an impossible objective but if I could achieve it then my voids periods would be radically reduced.
So, a tenant rents a 1 bedroom flat (after they left university) and they then meet their girlfriend and get engaged. They want to move into a 2 bedroom property to settle down for the future.
The couple get married (or maybe not these days) and start a family. They now want a three bedroom house and, as their family grows, they might even need a four bedroom house in the future.
The point is that, due to my focus on customer service and retention, they approach me asking for a larger house rather than taking the risk of renting from someone else!
At some time – one of your tenants is going to ask you for a property type that you either don’t have available or you don’t currently own and this is where a Buy to Order strategy can work well.
I let my tenant identify the kind of property and location where they would like to live and I then buy them a property to order! I talk to estate agents, view properties, negotiate a deal and – once my offer to purchase has been accepted by the vendor – I arrange for my tenant to visit their new home.
The advantage of “buy to order” is that you have already found a good quality tenant and all I need is a new investment that they would be happy to rent. Once the purchase is done – the tenant moves into their new home on completion day thereby avoiding any void periods!
Over the last seven years I have purchased five properties “to order” and all of these “lucky tenants” are still renting from me today!
The only time when I wouldn’t consider “buying to order” is when the tenant was looking to move away from my local area (as I like to own investment properties close to me) or if the yield was under 6%. I am always prepared to sacrifice some of the yield in exchange for a long term tenant that creates zero voids.
I would be really interested to hear what strategies other landlords adopt to try and reduce their void periods?
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