Vacancy Rates and Rental Properties

From time to time you will have vacancies in your investment rental property and an astute investor will plan for these occurrences. It could even be that when you purchase the property, it could be vacant.


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It is said that on average the amount of time a property is not rented throughout a year will be between 2 - 6 weeks with 4 weeks being the average. You will often see a term called "vacancy rates" which basically will tell you how many rental properties are vacant at any one time. As a guide a vacancy rate below 4% is ok whilst anything below 2% shows good rental demand.

Be sure to compare apples with apples and compare the condition and age of the property in your calculations. Naturally, renters will like a newer property over an older one and if the property has a lot of maintenance issues or has not been well maintained, this will also lead to a higher turnover of tenants and indeed the quality of tenant.

As a Landlord it is always good to remember Good tenants will not have to live in poorly maintained houses.!

Whilst having a low vacancy rate and a quick turn around is important, not having the property tenanted may not be as expensive as you first think.

Whilst you will lose income on the other side though, if you are claiming the expenses of the investment property as a tax deduction the return for the period that the rental property is not tenanted will therefore also reduce your tax liabilities for that period.

It is important to take note though that cash flow should always be your first consideration, Can you afford to maintain the payments etc until the tax relief is available.

In most circumstances you will naturally want to rent the property as quickly as possible so that you do not lose out on any rent money, however if the property needs an update or maintenance this could be the ideal moment.

In this scenario not only will you receive extra tax benefits from receiving no rent, you are also improving the capital value of the property and these improvements may also be a further tax deduction.

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Why Do Properties Not Rent?

There could be many reasons why it could potentially take some time to find tenants. Perhaps the location is affecting it. Or, it could be that there are simply a number of properties for rent in the local area.

Regardless of why your property is vacant you will need to get it rented as quickly as possible.

For every month that your property is vacant, you are losing money in revenue. Whereby if you reduce the rent by say 10% or 20% for the next 12 months you are still receiving 80% - 90% of the income you would like - much better than 0%

The key here is short term leases so as you can increase the rent as prices increase.

There are some other things you can do to reduce the amount of time that your property is vacant;

You might also consider providing some type of incentive ie a new dishwasher or TV in order to get your property rented more quickly. Certainly this will cost a bit of money but in the long run it is often less expensive to provide an incentive in order to get your property rented more quickly than to allow it to sit vacant for a period of time.

You might think about installing something in the property that would be appealing to prospective tenants such as a washer and dryer.

Make sure you making strong efforts to market your rental property by running ads in all of the local papers and hanging up flyers at places of interest.

You can also have a For Rent sign posted on the property so that everyone who drives by will see it and know the property is available for rent or lease.

Once again, a small amount of money spent on marketing is less expensive than the amount of lost revenue you could incur by allowing the property to sit vacant.

In addition, take be proactive and begin the search for tenants before your current tenant moves out if you have reason to believe that they will be leaving soon.

It is never a good idea to wait until the last minute and then try to fill a vacancy.

You could even ask the current tenants if they know of anyone who might be interested in renting the property.
It could be quite possible that they have friends who have visited and would jump at the chance to rent the property once it is available.

Keep in mind; however, that you still need to conduct a thorough screening. The first time you receive an inquiry on the property, you need to begin the screening process. Take the time to obtain some basic preliminary information about applicants while also providing information about your rental property.

Some people will find just as having an expert adviser take care of their finances they will want an expert to manage their property. Whilst finding a tenant may be quicker and easier wusing a Real Estate Broker or Letting Agent there is a cost involved and you are abdigating your control to this company or person. Therefore you should spend just as much time screening and qualifying your property managers as you would potential tenants.

See our Post on Selecting The Right Agent or Real Estate Broker Here