How you can cut your void periods and increase your profits
A void period is one of the biggest negative impacts on a buy-to-let landlord’s cash flow and profitability. Usually, void periods are caused by the break between one tenant leaving and the next tenant taking residence. They are nearly impossible to avoid. However, their length and negative effect can be minimised.
In this article, you’ll discover the most common reasons for void periods, and our top tips on keeping them to an absolute minimum.
A void period could be unavoidable
A fact of life of a buy-to-let landlord is that tenants move on. They may be expanding their family and need a bigger home. They may have found a new job in another area of the country. They may be buying their own home, or their marriage may have disintegrated. When void periods occur because of reasons like these, they are unavoidable. How you deal with it will determine your profitability.
How damaging could a void period be?
In its June 2016 State of the Market report, ARLA noted that the average void period is three weeks. It could seriously damage your profitability. Imagine no rental income for almost a month, while you must still pay mortgage interest, maintenance, council and utilities. That’s a lot of outgoings with no income – and why you should always maintain a buy-to-let reserve fund.
However, even though you’ve got a good reserve fund available in the bank, we’re sure you would rather avoid using it. So, you must do everything you can to minimise void periods.
When void periods can be minimised
There are other reasons for void periods that you should work to avoid or minimise. The most common are:
- You may already have found new tenants, but they may not be able to move in immediately.
- You may deliberately leave a few days between tenants. It gives you time to prepare your property, and undertake any maintenance issues that need to be done.
- It might be that your tenant leaves at a time of year when it is difficult to find a new tenant: during the summer holiday or around Christmas and New Year, for example.
- Finally, you may be let down by a new tenant who decides not to move in and experience an unexpected and extended void period.
Other reasons for tenants leaving a property are: that the property is poorly maintained or decorated; the white goods are old and don’t work properly, and the rent you charge is too high.
With the right strategies, buy-to-let landlords should be able to minimise or even avoid void periods caused by all the issues we’ve discussed in this article.
How we re-let properties fast and reduce void periods
There are several strategies that we package together in our approach to investment property management. The majority of properties under our management achieve tenancies within two weeks, comfortably beating the national average for void periods.
Our efforts to minimise void periods start with our tenant funding and vetting processes and continue throughout a tenancy. The strategies we use include the following.
· We keep in touch with your tenants
It means we build a relationship with them, making it easier for them to tell us of issues which might affect their tenancy. As soon as we discover a tenant is looking to move, we’ll start the process of finding a replacement tenant.
· We inspect properties regularly
Regular property inspections enable us to monitor your property for maintenance issues. These can be dealt with quickly, efficiently, and more cheaply than when they are left untended. And it means that there is less to do to prepare your buy-to-let property between tenancies, thus reducing an ‘unavoidable’ extended period of vacancy.
· We take a holding deposit
It confirms that the prospective tenant has the desire to move in, and makes it less likely that they will back out at the last moment.
· We try to time tenancy contracts
By writing tenancy contracts with an end date that avoids the difficult periods of the year, your property is more likely to find a tenant faster.
· We actively market your property and properly vet tenants
As soon as we know your property will become available to let, we start our search for your next tenant. We’ll call tenants on our wait list and put feelers out for good prospective tenants. This pre-marketing is one of the key reasons most of our landlords only suffer very short void periods. Sometimes we have had a new tenant move into a buy-to-let property within 24 hours of it becoming vacant.
We also ensure that we rigorously vet prospective tenants, and swerve the five tenant types that every buy-to-let landlord should avoid.
· We ensure your rental charge is appropriate
We will also do our rental price research on your behalf. We’ll look at comparable rental properties in the area close to where your buy-to-let investment property is. We’ll consider the conditions and amenities of your property. We’ll think about the state of the local private rented sector when your property becomes available. Having considered all these factors into consideration, we will then help you decide what level of rent will maximise your income while remaining competitive in the market. If we think you need to reduce your asking rent or accept a lower offer, we’ll advise you accordingly.
Remember that accepting a reduction of, say, £25 per month on a property and getting it let quickly will help your cash flow in the longer run. A reduction of £25 per month for six months will result in a loss of £150. If your property remains unrented for one month because you won’t budge, you will lose one month’s income and also must pay all the costs for that month. That’s a huge difference and could hit your buy-to-let profits for six.
Do you want your property let fast, and void periods kept to a minimum?
I know, a dumb question, isn’t it? Of course, you do! So, contact one of the Ezytrac team today, and join hundreds of other buy-to-let landlords who are benefitting from the Ezytrac way of managing investment property.
Yours in effortless property management,
Brett Alegre-Wood MARLA MNAEA