From profit to loss – how to prevent void periods
The best way for an estate agent and letting agent to be sure of delivering high quality service is to know their area inside out. There must always be concerns over any agent who tries to spread their net too widely. Specialisation is best, and the areas we specialise in are: Stoke Newington, Islington, Newington Green, and Highbury.
One of the things that specialisation tells us is that, although across the whole of the UK the last 12 months have seen a modest increase in rents, in our area, rents have been falling. In some parts of Islington, the fall is almost 8% year-on-year.
A stockbroker, asked to explain why a particular share was rising in value when the general market trend was down, said, ‘The price of that share is based on the same essentials as the price of every other share. Supply and demand.’ And that is also the underlying basis of rents.
Our task is not to jolly the market along with misleading encouragement. Our job is to tell it how it really is. And it is a fact that demand for rental properties is down a little on where it was a year ago. That won’t last – short-term fluctuations are no basis for investment decisions. Islington continues to be a promising venue for investment, and we expect to see these short-term declines offset in the near future. They do, however, remind us of the importance of avoiding void periods as much as possible. (A void period is a period when the property is empty, there is no rental income, but the landlord’s costs continue as usual).
So: is it possible to prevent void periods? And, if so, how?
The answer to the first question is no. It is not possible entirely to eliminate void periods. If something unexpected happens, we must find the landlord a new tenant, and we must do that as quickly as possible.
So we can’t eliminate void periods completely, but we can keep them to a minimum. Here’s how.
Look after the property
If a rental property is allowed to deteriorate, then two things happen:
- When remediation work is finally done, it is both more extensive and more expensive
- The tenant is more likely to move on in search of a better maintained property
Moving is awkward. It’s inconvenient. Often the tenant doesn’t want to do it. But you can help the tenant to stay in situ by ensuring that redecoration and other maintenance work is done properly and to a good standard.
Respond to tenant complaints and requests
This echoes the previous point. The difference is that, a moment ago, we were talking about doing maintenance and redecoration work as part of a schedule. If the tenant calls to say, ‘The tap is leaking,’ or ‘paint is peeling off in the bathroom,’ you will score brownie points with the tenant by fixing the problem immediately. A happy tenant keeps the tenant in the property and reduces voids.
Short-term rentals generate voids
When deciding what kind of tenancy suits you best – short-term, medium-term, or long-term – it’s as well to remember that, by their very nature, short-term rentals lead to voids when they end. Opting for longer term rentals, therefore, is a good way of eliminating voids. A long-standing approach has been to say: ‘the way the market is going, with rents rising all the time, I’m better with short-term rentals because I can increase the rent up when it comes time to renew. I still have the same tenant, but now I’m getting more rent.’ But in a time of falling rents, that doesn’t work. You’d have to be prepared for the tenant to say, ‘yes, I’d like to renew – but rents are down by 8% and I’d like to see that 8% cut in my rent.’