Minimising rental voids - some helpful tips

How I minimise rental voids - by Richard Pennack (MD of iQ Property Hull Ltd)

Rental voids seriously affect a landlords bottom line - FACT. A rental void of just one month accounts for an 8.33% loss of your annual rental income. For many recent landlords this is the difference between making a profit or a loss from a property. 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 2001.

Please remember that my properties are all mid range. My typical tenant profile is predominantly working couples, families,young professionals and retired couples. Some of the strategies outlined may be transferable to other market sectors but not all of them.

I will offer tips and show you how to keep your rental voids to an absolute minimum. In summary here are the keys points :-

1. Establish market rent for property type - Check with agents
2. Check rental demand before buying – pre-advertising
3. Market for just 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 Section 13 rent rises in principle before letting
7. Incentivise outgoing tenants to cooperate with viewings

Establish market rent

I look at Rightmove.co.uk or findaproperty to establish a rental baseline. 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 in local shops or newspaper

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 and their agents 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 (Advertise your property online for £69 - here). 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 5% (or £50 max) below 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 could 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, if necessary. 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 below normal market rental value. When I call them back I play the odds, 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 can 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. Although this is not an exhaustive list these key points will help you minimise your voids too.

Visit us at iQ Property for more details or if you have property interests in Hull or east Yorkshire. iQ Property - Proactive and professional lettings, management and investments in Hull and Beverley. Arla registered.

Great news for small investors - 85% BTL returns!

Some fantastic news for investors, Kensington is the first lender to come back into the market with an 85% LTV product for some time. The criteria is that you must earn at least £25k and rental coverage has to be 120%. It's not the best interest rate at 5.99% for 2 year fixed, but for stacking deal it works wonderfully. Of course, it means cashbacks on some of our properties if you qualify for the product.

Here's the BUT....the rate is fixed for the first 2 years then hikes up quite a bit so have a plan to exit before the 2 year point if you take it The arrange ment fee is 3.5% which is also on the steep side. You can only have 0-3 properties with them so there is also a limit. At least it is the first step back to 85% LTV lending, others will follow. Either way its good news for the small investor!


Specialist property lettings, management and investment in Hull. Visit us at
iQ Property

Letting Agent v DIY? - 'Ask the Expert' Article for the Hull & East Riding Daily Mail - Feb 11

Letting my Property? Agent vs DIY

This is a question asked by many landlords, especially when money is tight!  The common perception is that some agents do not offer value for money, and that the landlord would be potentially better off letting and managing the property themselves. 

Any landlord will tell you that there is a lot to learn about letting property. On top of marketing the property, tenant queries, contractual obligations, maintenance and viewings and it can be a time consuming business to keep up to date with ensuring the property meets its legal and safety requirements. 

Whilst many smaller landlords successfully manage their properties, it is advisable for inexperienced landlords to use a qualified agent until confident enough to manage for themselves.
Remember though, not all letting agents are equal – Avoid inexperienced or unregulated agents. Ensure your agent has good local knowledge and is a member of an industry professional body, such as ARLA, RICS or NALS.  Members of these associations are governed by a professional code of conduct and strict rules on dealing with client money. They will also be properly insured and members of a redress scheme.

A good agent will offer: Market experience, accurate rental assessments, full tenant referencing, Deposit protection, up to date contracts, Inventories, legal and rent protection, full internet advertising (on sites like findaproperty, Zoopla, Rightmove etc) and effective local marketing. They will also ensure that your legal obligations are met, the property is inspected regularly, check in and check out procedures are provided, and your rent is collected on time. Many agents will have a list of vetted contractors on their books to undertake any work on a property at short notice (some on 24 hour call out), and will also be able to guarantee the standard of workmanship whilst obtaining preferential rates.  You are also less likely to encounter problem tenants using a qualified agent. Essentially, these are some of the benefits of using a good agent and why many experienced landlords choose to use one.

For those landlords who still aren’t convinced: Don't rely on relatives and friends to manage your property - this is asking for trouble. It is a considerable responsibility which only a committed landlord or a qualified letting agent should take on. So ask yourself is the potential saving actually worth it?



 

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Your questions answered by Letting and Management agent Richard Pennack.  Managing Director of iQ Property (Hull) ltd and a member of ARLA. Specialising in Residential and light commercial property Lettings, Management and Investments. Call  01482 240148  or email richard@iqpropertyhull.co.uk or visit www.iqpropertyhull.co.uk