Why landlords need to plan and budget for void periods
New BTL landlords have an awful lot to think about, which makes planning a crucial part of the process of buying and running your BTL property or portfolio.
One aspect that new landlords sometimes overlook is void periods. These need to be planned, budgeted for and kept to a minimum. Void periods vary throughout the country and in a recent survey undertaken by Direct Line the average void period was found to be 22 days, although this varied from 11 days in Birmingham to 33 days in Liverpool. So what steps should a new BTL landlord take in order to plan for void periods.
Research what the historical void periods have been in the area. This can be done by speaking to local letting agents and gleaning from their knowledge and expertise or by monitoring similar properties on the major property portals like Rightmove and Zoopla.
Don’t just research the length of the void periods, gather information on the frequency of the voids, the average is 18 months according to recent research, but what is it in your area? Bear in mind that furnished properties tend to turnover more frequently than unfurnished properties and certain properties can be stepping stones for people trying to get on the property ladder or for people relocating who are planning to buy and therefore these properties turnover more frequently.
Before buying your property check that the figures stack up. Key the income and expenses into a spreadsheet. When doing this ensure that you allow for void periods. Whilst on average properties turn over about every 18 months, it is prudent to allow for a void period every 12 months just to be on the safe side.
Choose a property that will let easily and bear in mind that the gross yield is the headline that grabs you, but it is the net yield that pays the mortgage. Certain houses look great when assessed on the headline gross yield but if they are properties that have lengthy voids then these need to be avoided or allowed for in your budgeting.
Reducing the frequency of void periods
Landlords tend to think there is nothing they can do to reduce the frequency of the void periods, but the tenant is a customer and the service they receive will influence the time they spend in the property. If you use a letting agent choose one who has an out of hours emergency number and has a good reputation for service. If you manage the property yourself deal with tenant enquiries and maintenance issues promptly. Respect the fact that this is the tenants home and that they are entitled to “quiet enjoyment”, don’t turn up unannounced and expect access to the loft to get your Christmas decorations!
Don’t treat tenants like second class citizens and make sure that you know the law so that you can ensure that you are always doing the right thing.
Minimising the length of void periods
Probably the best way to reduce the void periods is to ensure that you price the property correctly. Don’t over-price the property or this will increase your void period. Research the price of similar properties in the area and price it to let. Twelve months rent at £675 is better than eleven months rent at £700!!!
When conducting viewings, make sure you turn up on time and make sure that the property presents well and is clean. Mow the lawn, weed the drive, paint the front door, plug in some air fresheners etc.
Know your target market and advertise accordingly. If you use a letting agent get regular feedback on viewings and what prospective tenants are saying about your property. If it doesn’t let within 4 or 5 viewings then something is wrong and you need to listen to the feedback and take action.
It’s the voids that kill you!! When you review your BTL property in five years time and work out how much (or how little) money your investment has made, it will not matter as much that your property rented for £675 or £700, but it will matter whether it was empty for 2 days, 2 weeks or 2 months in between tenancies.
Phil Shaul MARLA