No landlord likes void periods. It’s that period in time where your property is unoccupied usually because you are between tenants. Empty properties can cause problems if you have a mortgage to pay. In this article we’re going to explore how to manage and avoid void periods.
Why Void Periods are bad News for Landlords
When a property is empty you won’t be receiving any rental income. You’ll still have to pay the standing charges for utilities, even if nobody is living there. Then there is council tax. Some local authorities offer up to six months exemption on council tax if a property is substantially unfurnished but do check before you make this assumption.
The other major expense is the mortgage payment. You can rest a bit easier if you are not paying a mortgage, but otherwise, this is a significant expense when there is no rental income. It is why advance planning is essential.
Minimising voids is critical if you want a successful buy to let property portfolio. The following strategies will help you keep void periods to a minimum and where possible, avoid them altogether.
It pays to be well organised in the lettings business. If you don’t have your ducks in a row, it will inevitably cause delays in setting up a new tenancy agreement.
Make sure all your paperwork is in order. Check your gas certificates and Energy Performance Certificates have not expired; you can’t let a property until you have these. This is where landlord software comes in handy, as it will give you a timely reminder well before you need to act.
Assuming you are aware a tenancy is coming to an end or your tenants have given notice they intend to leave, kick into gear. There’s no reason why you can’t start looking for a new tenant before your current tenant has left.
If the property requires updating or some serious maintenance, plan to start work as soon as the property is vacant. Have contractors booked in and ready to go, so you don’t waste any time. The sooner you get the work done, the sooner you can install a new tenant. Ideally, have a new tenant ready to move in as soon as the work completes, although build in a contingency plan in case the work overruns due to complications.
It’s customary to clean a rental property between lets. Do this the day after the previous tenant moves out (assuming there are no major issues when you do the check-out). If you use professional cleaners, book them well in advance, with the proviso that you may have to alter the date in the event of problems.
Look for Tenants Well in Advance
You can begin advertising the property as soon as you know your tenant is leaving. Plenty of landlords organise viewings while an existing tenant is still there (with that tenant’s permission, of course).
Do check the property before you book in viewings. Give the place a once over so you can see if there are any issues and fix these before you advertise the property.
Take Professional Photographs
Photographs make or break a property. They are the first thing a potential tenant sees when they view an online listing, so it makes sense to use the best quality photos possible. If you use a letting agent to market your property, their package might include professional photos. If so, great. But if you take your own photos, do so with caution.
Make sure the property is clean and tidy before you take photos
Choose a sunny day and switch all interior lights on so every room is bright and well-lit
Take photos from multiple angles and choose the ones that offer the most flattering viewpoint
Use photo editing software to tweak your images, but don’t mis-represent the space
If your photographic skills are sorely lacking, hire a professional property photographer to take some decent photos. Don’t forget, you can reuse the same photos each time you advertise the property as long as nothing significant changes, so it’s money well spent.
List the Property in Multiple Locations
The more exposure your property has, the easier it will be to find suitable tenants. Using a letting agent’s tenant finder package might be your preferred option, but if you manage your own portfolio, advertise your property in more than one place.
Rightmove and Zoopla are the two largest property portals, but to use these you need to engage the services of an online letting agent
Social media is free; list your property on local buy/sell pages as well as your own page. Encourage people to share the listing, in case there is someone in their social circle looking for a new home
Place an ad in the window of the property, to attract locals walking past
Ask your existing tenants if they know anyone who might be interested
Place an ad in the local press
Buy/sell sites like Gumtree are also worth trying
Cover as many bases as possible and you’ll maximise your chances of finding a replacement tenant fast.
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Maintain the Property
Don’t ignore maintenance issues. It will take you a lot longer to find a tenant if you don’t take care of maintenance issues as no one wants to live in a property that isn’t well looked after.
Tackle maintenance issues in a timely fashion. Take note of problems during regular property inspections and fix them ASAP. Maintenance issues are likely to get worse over time if you don’t deal with them. Keeping on top of such issues will mean that the property doesn’t have to be unoccupied for long periods of time if you need to conduct repairs between tenancies.
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Look for Long-term, Good Quality Tenants
Long-term, reliable tenants are what every landlord is looking for. Screen tenants carefully and prioritise those who are looking for long-term accommodation. Offer tenants the option of a longer tenancy if they prove to be reliable in the first year. Many families and single parents are keen to take on long-term tenancies. It allows them to put down roots and make a real home for their children.
Be Willing to Work With Tenants
Tenants sometimes have problems paying the rent. Life happens – they lose their job or get sick. Instead of eviction being your first thought, work with them to come up with a solution that suits everyone.
For example, consider discounting the rent for a couple of months until the tenant can get back on their feet.
Charge a Competitive Rent
Always research local rents before you advertise a property. If you charge too much rent compared to market averages, there won’t be any interest in the property, and it will be empty for longer.
Chat to local letting agents if you’re new to the lettings business. Look at similar properties in the local area to see what current rents are like. It’s OK to charge a bit more than average if the property has had a major refit or offers something extra, like off-road parking in a restricted parking zone, but tenants won’t want to pay extra for no additional benefit.
The more competitive your rents are, the easier it will be to secure a new tenant. Do the maths and find the right balance between good rental yields and minimal void periods.
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Look Into Deposit Replacement Schemes
Deposit replacement schemes are a relatively new idea. Instead of a tenant paying a large sum up-front, they pay a non-refundable fee in return for an insurance policy that pays out to the landlord in the event of issues when the tenancy ends.
In areas where rents are high, such as London, a tenant may have to pay up to £2,500 on top of a month’s rent in advance before they move in. That’s a lot of cash to find.
There are many advantages of a non-deposit scheme, including fewer void periods, but weigh up the pros and cons before you decide. Not all tenants like the idea of a non-refundable deposit and landlords still have to make a watertight case before they make a claim for damages.
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The more parameters you set when it comes to tenants, the harder it will be to find the right person. It’s perfectly OK to specify a non-smoker, professional person with no pets if that’s what you’re looking for, but be aware that the pool of acceptable applicants is a lot smaller as a result.
If you want to minimise void periods, be flexible about who you are willing to accept as a tenant. For instance the traditional ban on tenants with pets means that there are a lot of pet owners out there looking for rental properties that will accept them and their furry friends. Assess each applicant on their own merits.
Offer Introductory Deals
Sometimes it pays to offer a few headline deals to attract tenants. We’re not suggesting you offer tenants a free kettle or pillow set, although you could if Aldi has a good offer on this week!
Instead, consider deals like discounted rent for the first three months, or one month free if they can move in within a set amount of time. You could even offer to cover the cost of their move by providing a ‘man with a van’ service.
Think about what might attract the most interest and tweak it according to your budget. The more attractive your offer is, the faster you’ll find a tenant to fill the void.
Consider Switching to HMOs
The HMO model is usually a bit more protected from voids. Even if a tenant moves out of your HMO you will be left with other tenants. It’s generally easier to let out individual rooms to multiple tenants than an entire property to one tenant.
There are many additional things to consider when letting out HMOs, including HMO licences and extra legislation. However, if you want higher rental yields and lower voids, HMOs are worth considering.
Grow Your Portfolio
Landlords with only one or two properties are more at risk of financial hardship if a property lies empty. The more properties you own, the easier it is to spread the risk of voids over the entire portfolio because income from the other properties can be used to cover the costs of the empty one.
It’s also wise to diversify into different areas. For example, you could invest in a mixture of student houses, HMOs, and commercial properties. That way, if one sector dips, you don’t have all your eggs in one basket.
Do bear in mind, however, that using mortgage finance to buy more properties comes with its own set of problems, such as rising internet rates and the loss of mortgage interest tax relief.
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Ensure you Have Money set Aside to Cover Void Periods
Managing a property portfolio is no different from running any other type of business. Your cash flow will rise and fall according to regular and irregular expenses. Sensible landlords run regular cash flow forecasts, taking account of their known expenses and planning for any unexpected ones. Landlord software can help in this regard.
It’s always sensible to plan for void periods. Set enough money aside to cover two to three months’ worth of voids to help mitigate any financial risks.
Have a Contingency Plan in Place
Have a plan in the event you have to cover an extended void period. Work out what your outgoings are and how much money you need to keep up with mortgage payments, standing charges, etc. Once the money runs out, plan what happens next. For example, some lenders might let you take a temporary payment holiday; or you might be able to switch to an interest-only mortgage to reduce your payments.
Note: if your mortgage payments are in jeopardy, speak to your lender as soon as possible. They should be sympathetic if you keep them in the loop, but if you ignore the problem in the hope it goes away, they may take punitive action against you.
Plan for every eventuality so you are not caught off-guard.
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Think Outside the Box
Try and come up with an innovative solution if you have an empty property. Instead of going down the usual route, look for other answers to the problem. For example, although a long-term tenant is the most desirable option, perhaps you could provide temporary housing to local authority tenants looking for emergency placements or visiting lecturers from the local university? Or go down the short-term lettings route if the property is in a nice area or close to a major tourist attraction.
Void periods are not ideal, but every landlord has to deal with them sooner or later. Where possible, take steps to prevent extended voids from happening. But it’s also wise to plan for voids, so you can minimise the impact a void period has on your cash flow.
How do you handle voids? Do you have a plan in place to reduce the impact voids have on your cash flow? Leave a comment below or get in touch via social media. We’d love to hear more about your experiences.
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