4 ways to reduce the risk of vacancy
One of the first things you will have to do after investing in property is find tenants. The sooner the better, as everyday that goes by equates to wasted cash flow.
The sooner the better, as everyday that goes by equates to wasted cash flow
For example, CoreLogic RP Data asserts that the average weekly rent in Sydney (for both houses and units) during September 2015 was $592. Essentially, this means that every day your vacant property could be costing you around $85.
Unfortunately, finding the right tenants to live in your home isn't as easy as it sounds. There is a process you must go through that involves comprehensive research and your due diligence – although an investment property manager can take care of this for you.
Figures from SQM Research reflect this as they show that both Melbourne and Sydney have over 10,000 vacant homes, which all adds up to a lot of lost income and disgruntled investors.
However, these numbers only make up for 2.2 and 1.7 per cent of the total markets respectively, and using a property agent can help to ensure you're not part of the vacant minority.
Here are a few tips for finding the right tenants and maintaining your rental income:
Keep your property in top condition
Any buyers' agent will tell you that property investment takes a steely resolve, where you keep your emotions at bay and make financial decisions using primarily your head, instead of your heart.
However, now that you own it, you need to ask yourself: "Would I like to live here?" Rather than spending thousands of dollars on unnecessary renovations, you should aim to ensure solely that it is in good repair.
This can simply mean giving it a fresh lick of paint, fixing any minor issues and modernising frequently used fixtures like blinds, flooring and kitchen cabinetry. After all, if you don't want to live there, why would someone else?
The Australian Securities and Investments Commission (ASIC) recommends only investing in changes that will add to your rental yield or make it easier to secure tenants, as while property repairs or maintenance are tax deductible, improvements are not.
Set a competitive rental rate
If your property is priced too high, it's likely that you won't be able to attract or retain tenants. Conversely, if it's too low, then you could be missing out on valuable cash flow.
Rent prices can vary substantially between cities, suburbs and even streets. For example, CoreLogic RP Data found that in the Sydney suburb of Collaroy, the median rent grew a whopping 31.6 per cent in just the 12 months to September 2015.
This is why you should be constantly doing your research into comparable rental properties in your local area, while keeping an eye on the vacancy rates to ensure you're meeting the market with your price.
At the end of the day, reducing your rent by as little as $5 will have a tiny effect on your pockets, and will be far cheaper than having your property sit vacant.
Choose and maintain good tenants
In a perfect world, there would be tenants that pay their weekly rent promptly without a hitch throughout their tenure at your property. While these types of people do exist, it takes a fair amount of research to sort the good from the bad.
You will need to market your home to the relevant people, before taking prospective tenants through your property and finally taking your pick. This includes poring over their references (the ASIC recommends you request at least three from previous landlords, agents or employers) to get an idea of their history.
It takes a fair amount of research to sort the good from the bad
You should steer clear of those who have had a tumultuous tenure in the past, as they could damage your property, miss rent payments or disappear altogether, leaving you with a costly mess to clean up.
If you have had your property filled with dependable tenants for a length of time, you should look after them by responding to any requests they may have without delay and only raising the rent when you can easily justify it.
Use an investment property manager
If you would like to mitigate the risk of finding yourself in financial strife, you should look into the services that property investment managers can offer.
A competent property agent will have your best interests at heart, helping you to navigate your way to achieving your real estate ambitions. This includes assisting you by:
- Recommending changes or improvements to your property that will garner the most positive outcomes
- Using their knowledge on the local market to advise on the most suitable weekly rent, to firstly secure a tenant, and secondly optimise your income
- Marketing your home using a suitable strategy and their vast network of real estate professionals to increase awareness among prospective tenants
- Vetting any people interested to ensure you are getting stable and reliable tenants
- Providing access to databases of both 'blacklisted' people and their own personal log of previously approved tenants
A satisfied tenant will often mean a happy landlord, and you can rest assured that your property investment manager will endeavor to keep all relations positive. This includes collecting the rent, attending to any tenant demands like necessary repairs or maintenance and undertaking regular inspections.