How to Lower Your Vacancy Rates
Putting some effort into attracting and keeping good tenants is crucial to your financial security and will pay off for you and your investment property in the long-term.
Having good tenants is a real asset and when you find them you want to do everything possible to keep them.
For investors the good news is that renters are on the increase with the 2016 Census reporting that 30.9 per cent of Australians now rent. In particular it is the first-home buyers in our capital cities who are being increasingly forced onto the rental merry-go-round and are becoming resigned to the fact that they will be long-term tenants.
Recent Domain figures report that in Sydney the average cost of renting a house is $550 per week and $530 for a unit — the most expensive rent in Australia (and second in the world).In Melbourne it’s around $420 per week and $395 for a house or unit respectively. From a landlord’s perspective, that’s income that you want to sustain so it pays to put the effort into finding and keeping your tenants. You obviously want to avoid the lost revenue and interference to any mortgage payments that may ensue if you have your property sitting vacant for any significant period.
What does work in your favour is that good landlords seem to be short on the ground. A 2017 survey by consumer group Choice found that renters lived with widespread anxiety and put up with terrible conditions as one-in-five feared eviction. The survey found most renters (83%) did not have a fixed-term lease, or were on a lease of less than 12 months.
Start with the Right Property
So how do you attract quality tenants – the ones who pay their rent on time, take care of your house or unit and are not disruptive to the neighbours?
Before you buy you need to make sure your property has the potential to attract the ideal tenant. Do your research on how common vacancies are in the area and whether it can attract the rent you desire.
Buyer’s Agents, like Cohen Handler can find you a great investment property based on your individual budget and needs but also has an in-house property management team. They will be able to provide you with an accurate quote on rental potential as well as the type of renters you can expect to attract. This will give you a better idea than the information provided by a real estate agent working on behalf of the vendor.
It is not true that lower socio-economic areas cannot achieve a good tenant. However, you should listen closely to other local investors and residents to get an understanding of the type of person who may live in your investment.
Once you’ve bought the party has only just begun. Consider the upgrades, repairs, renovations and cosmetic improvements that will give your home street appeal and help it stand out in the market place.
And please don’t scrimp on the quality of the photography. Hiring a photographer who will present your property in the best possible light will make sure you get the right people going to the inspection in the first place. When marketing the property, ensure that the home is listed at an appropriate time of the day, e.g. when the morning sun is making the place look beautiful or at a time convenient for professionals, such as after work.
Top Tips to Attract and Keep Good Renters
Here are a few handy hints you may want to consider to help you to attract and keep good tenants.
- Know who your ideal tenants are first. A great tenant is usually defined by property managers and investors as someone who is diligent with repayments, alerts them to maintenance when necessary but isn’t hard wearing on the paintwork, floors or appliances. They leave the home neat, tidy and clean when their lease ends and stick to the correct notice periods.
- Buy where people want to live. Close to transport and school are the obvious ones. But don’t underestimate access to coffee – people want to be able to get out and enjoy their brunches on the weekend and want cafes and takeaways within walking distance. Even if it is a great property, if it can’t meet the lifestyle requirements of the tenants it is highly likely the property will remain vacant. Other attractive factors include close to work, entertainment facilities, retail, a vibrant community or public open spaces. Is it quiet? Is there a vacant block next door? Are there any major developments planned nearby that could affect the appeal of the property through shadowing or noise. Crime rates may also be an indication of whether it is a location where people will want to live.
- Buy and maintain a good quality property. Good tenants are more likely to be attracted to a clean home that is well maintained. Simple things like new stainless steel appliances, fresh paint, some new fittings such as door handles, a new kitchen bench, clean floor coverings or manicured gardens will go a long way towards attracting the ‘right’ tenant who will treat your property like their own. Some other features that will help you achieve a higher rental price include air-conditioning and flyscreens, good wi-fi and internet and allowing pets.
- Premium features. Tenants with higher incomes and nicer cars will naturally want a parking space. An internal laundry is also great (or at least a private area to hang clothes) as well as a balcony.
- Set a fair rental price. Charging too low a price will alarm tenants, who will automatically assume there is something wrong with the home, while charging more than the market can bear is also a major turn off for all categories of renter. Charge what the home is fairly worth. Be prepared to be flexible – sometimes it’s worthwhile dropping the rent by $5-$10 a week to get the right person in rather than hang in there with an empty property for another three weeks.
- Families are more likely to stay in a rental property long-term. Some landlords are not overly keen on pets and children but there are a lot of positives in appealing to families. The effort required to pack up and move is a lot more daunting for a family compared with a young professional couple. Also once children are settled into schools, parents are less likely to move them.
- Consider taking out landlord insurance. It can take some of the stress out of renting by covering damage or loss to your property, protection against unpaid rent, theft or malicious damage, and even the cost of replacing or repairing furnished properties.
- Look after your tenants. The Choice survey found that pest infestations, for example from cockroaches, were a problem for 27% of renters, while 20% had to deal with mould that is difficult to remove or is reoccurring. Other annoyances included doors and windows not closing properly, peeling paint, leaks or flooding. Make sure the property feels fresh for the new tenants – dark spaces and dank smells put everyone off. Have a look at the details from a tenant’s point of view – is the kitchen sink big enough? Is the stove electric or gas? – Generally, the latter is preferred. These are easy fixes and they keep tenants happier for longer which should result in a lower turnover.
- Make timely repairs. One of the most common reasons for vacancy is infrequent or nonexistent repairs. Invest the time and the money that is necessary to keep your property operating in top condition. If a property manager is in charge then you may wish to leave instructions for repairs to be undertaken up to a certain price point without your specific agreement. When you have the perfect tenant, don’t lose them for minor reasons.
- Hang onto the good ones. Once you find a good tenant, you want to keep them. Rental increases should only be implemented when the market truly justifies this, and plenty of notice should be given. It’s worth sending a letter to the tenant explaining why there has been an increase. Ask for tenants’ feedback and maintain open channels of communication with the tenant. Remember they are paying off your investment for you.
If you are interested in buying an investment property, Cohen Handler’s team of expert buyer’s agents can help you find the right property at the right price. We also offer a professional property management service with agents who are highly experienced in maximising the returns on your investment property. Contact us now.