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Finding Tenants when Vacancy Rates are High

Fuelled by low interest rates, home lending to property investors is at record highs. The influx and demand for investment properties for buyers to add to current property portfolios and those that are taking advantage of the benefits of purchasing via personal superannuation funds leads to the prospect of increased competition between landlords hoping to attract tenants. Increased supply in the rental market life-cycle puts pressure on landlords to compete with their fellow counterparts for the best tenants in the market. 

When rental vacancy rates are low, finding a tenant is relatively easy. Tenants will flock to open home inspections, submit and apply for multiple properties and sometimes offer to pay above the asking rent. In some cases, they also compromise on the features, quality and location of their desired property.
The opposite occurs when the supply cycle favours the tenant and an oversupply of available properties provides for more choice. When vacancy rates rise, prospective tenants can afford to be more choosey and landlords are forced to compete for their attention.

There are several things landlords and their property managers can do to increase their chances of successfully securing a tenant for a vacant property. The obvious tactic of reducing the asking rent should always be last on the list.

THE LITTLE EXTRAS
If your property lacks a dishwasher, heating, cooling, an outdoor entertaining area or adequate storage, adding these popular items could get it rented out faster. As an investment property, these extras are tax deductable and can be used to help fund the overall cost of supply. Actual out of pocket cash can be surprisingly low.

FRESH COAT OF PAINT
There is nothing like a fresh coat of paint to work wonders when seeking the attention of prospective tenants. The whole house need not be attended too; only the high traffic areas and let the smell of fresh paint do the selling.

A THOROUGH CLEAN
Everyone wants to move into a clean home. Investing in a professional cleaning company to get the home spic and span can make the difference in renting it our quickly; a week or two of extra rent as opposed to having it vacant in many cases pays for the cleaning and some.

MARKET THE HOME PROFESSIONALLY
Many advertisements for rental properties aren''''t flash - with poor photos, no floor-plan and a cursory description that fails to appeal to the tenant''''s emotion as well as their wallet. Everyone is time poor and most tenant's shortlist homes from the real estate portals before viewing. You have three seconds to grab a tenant's attention when they search the internet. Poor quality marketing reduces the opportunity of your house being on the shortlist. If you commission a floor-plan and professional photos, which can have virtual ''''furniture'''' added for scale, you can use them every time your property is vacant. Make sure the text in the advertisement sells tenants on the experience of living in the property, not just the number of bedrooms.

PETS OR NO PETS?
Australians are a nation of pet lovers. If you allow tenants with pets into your properties, you''''ve got a far wider pool of prospective occupants and much less competition, as many landlords won''''t allow pets. Subject to statutory legislation, protocols can be put in place to ensure that should pets be allowed, and damage caused, repair costs can be recovered from the tenant. 

OPEN FOR INSPECTIONS
With more and more pressure on our time, making the property available for viewings at multiple times is a must. With online booking systems such as Insect Real Estate, making properties available at multiple times has become the norm rather than the exception. Dedicated leasing managers of rental portfolios are now commonplace and it's what is expected by the tenant and landlords alike. Making it too difficult, again will have the tendency to have your property overlooked by prospective tenants, opting to attend open house inspections that are at a convenient time for them.

SEEK FEEDBACK
Get feedback from prospective tenants at the opens; ensure your property manager gives you all reasons why your property may be overlooked. Are they interested? If not, why? Is it something you can address?

THE LEASE TERM
Be flexible in the length of the lease. Some tenants want the certainty of a two-year lease, while others may only need six months. There is no reason why the traditional '12 month' agreement can be either shortened or extended even only for a single month. Review the calendar month it expires and determine if I falls on a high demand month or low demand month. By increasing or decreasing the term length, it may also help you to make the expiry date fall on a month that has traditional high demand for rental properties. 

BE VIGILANT ABOUT RENT RISES
If you do drop the rent to get a tenant, don''''t forget to be extra vigilant when it comes to subsequent regular rent rises. Pre-determined rent rises during the lease term are permissible so long as they are noted in the initial agreement. Enticing a tenant with a 'reduced' amount initially may be the trick to preserving your return and finding a tenant quickly. Noting that moving is a hassle and expense and most tenants are prepared to pay extra in rent to avoid it.

DON'T PANIC
If your property remains vacant for an extended period, do not accept the next tenant that applies simply to get it tenanted. It''''s better to have no tenant than a tenant who is always late with the rent or leaves your property trashed. Pre-planning and having access to a cash buffer to cover mortgage repayments and property expenses for vacancy periods is part and parcel of property investing. 

UNDERSTAND YOUR INSURANCE COVERAGE
If your property is vacant for an extended period of time, it is important to notify your landlord insurance provider to discuss the implications and make sure you remain covered. Not all insurance policies are the same. Do not be fooled by accepting the 'lowest' price policy; they are lower in many cases for a reason, and it is more likely that you will not be covered in certain instances.

Being a property investor is not a 'passive' investment strategy. Keeping up with all the regulatory requirements and responsibilities coupled with understanding market forces which may impact your financial well-being requires effort and continually learning through experience. Having a professional property management team is essential to help you navigate through all the responsibilities as a landlord and help protect your asset and maximise your return.

Wishing you every success,

Manos Findikakis – CEO Eview Group



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