Establishing a sustainable cash flow base for your portfolio is essential if you hope to build wealth through property investment.
As such, devising a strategy to keep your property tenanted to the right residents at the right price should be at the top of your priority list, alongside optimal asset acquisition and finance structures.
One of the best ways to minimise vacancies is to understand why they occur in the first place. Thereby reducing the inherent risks every property owner must address in order to shore up the necessary income for mortgage repayments, maintenance and holding expenses.
While you need to give yourself a little breathing space from the end of one lease agreement to the commencement of a new one, in order to…
Have new leases drawn up and executed
Write condition reports
Clean carpets and attend to any small maintenance jobs, etc.
Anything beyond three to four weeks between tenant turnovers can become problematic for your cashflow.
A good way to avoid extended vacancy periods is to understand the five inherent risks that can increase your exposure to them…
This is generally the most common reason a rental property remains empty. With masses of market data available via online property portals, today’s tenant is more educated (and discerning) than ever.
If you fail to price your property according to market expectation, you’ll fail to attract the market. It’s that simple. Hence, the rent you set should be based on what the market is willing to pay, not just your financial needs as a property owner.
Ask yourself – is it better to budge a little in the short term, to have a more sustainable asset that generates consistent income rather than sporadic bursts of interrupted cashflow?
This often occurs when investors buy into secondary (speculative investment) locations and end up with an asset that’s essentially doomed to fail in the long run. Think resource boomtowns where vacancy rates are now starting to climb.
Mackay is a good example. Runaway investment recently created an oversupply of rental accommodation in this regional community, largely reliant on the mining sector for its economic and employment viability.
What we’re seeing now, in the wake of cooling resources demand, is a very different housing market in Mackay. Vacancy rates were at 9.1 per cent in June this year, with rents dropping from an average $350 to $300 per week for three bed townhouses, and from $275 to $225 for a two-bed unit in the town.
There were around 1200 vacant rental properties in September. But with fewer resource sector jobs going in the region, demand has eased significantly and reports are that the Mackay market is seeking some equilibrium, with the scales tipping back in favour of buyers right now.
When it comes to tenant interest, it’s all about location and amenity.
Selling your property to a prospective tenant should be approached in much the same way you’d sell to a prospective buyer. One is arguably just as important to the long-term viability of your portfolio, as the other.
The first step in making your marketing work to minimise vacancies is to know your tenant. Understand who you’re appealing to – what do they want? What are they prepared to pay for it?
How do you speak to them?
First impressions count, and that includes things like the images you post to accompany your online advertisement.
Today’s world of digital marketing is a highly visual medium, where prospective tenants generally make decisions on the basis of their immediate emotional response to your property, based on the photos you use.
Staging your property to translate its livability in pictures is important to make it stand out from ‘the crowd’.
Sometimes there’s no escaping the fact that the location of your asset is not suited to the majority of tenants — lacking the necessary amenities to attract and retain good long-term tenants.
Your residents require a diverse local industry base, within easy commuting distance for employment opportunities. Or how will they pay the rent?
Today’s tenants also prioritise lifestyle amenity and well-established social infrastructure, such as education and healthcare facilities. This all goes back to knowing who your tenant pool is and targeting their requirements accordingly.
If you’d like more information regarding property management strategies that can help to minimise vacancy periods, while maximising your investment portfolio cash flow, why not connect with the experienced team here at Little Real Estate?
Our extensive industry knowledge and up-to-date market expertise can benefit you, right throughout your property investment journey. Click here to find out how we can help…