A ‘void’ is the period when a property lies empty between tenancies and is therefore not generating any rental income.
Voids are regarded as one of the biggest things that can negatively impact a landlord’s profits and, unfortunately, they’re almost impossible to completely avoid.
There may be a gap between one tenant moving out and the next moving in, simply for logistical reasons. Some landlords like to leave a few days between tenancies in order to carry out some maintenance. You could be let down by a tenant who changes their mind at the last minute and find your property unexpectedly vacant, or it might just be a tricky time of year. For instance, your current tenant might have given notice to leave on 30th December and it’s not possible to find anyone who wants to move in over the festive period.
On the other hand, a void period could be your or your agent’s fault. If you haven’t updated the fittings and décor recently and there are ‘nicer’ properties available, tenants are probably choosing those. Are you being unrealistic with the amount of rent you’re charging? Perhaps you didn’t carry out inspections during the last tenancy and it’s going to take some time to clear up the mess made by the outgoing tenants.
The average void period between tenancies, according to ARLA’s June 2016 report, is 3 weeks. Depending on how much your property cash flows, a single void period of this length could wipe out a good portion, if not all of your monthly profit - in addition to which, you still have mortgage repayments and maintenance bills to cover. On top of that, a property can quickly start to look unattractive if it becomes cold and dusty, which can result in you getting lower offers from prospective tenants and the property taking even longer to let.
So you need to do all you can to minimise voids, even if it means taking slightly less monthly rent. Too many landlords turn down otherwise suitable tenants who make an offer below the advertised rent, purely because they feel it’s worth what they are asking. If the market is very strong and you or your letting agent are confident another tenant will sign up at the full amount very shortly, then it may be worth holding out, but if the market is slow it could be a mistake to reject a ‘reasonable’ offer.
For example, if your property usually lets for £700 a month and someone offers £675, it’s probably better to take that than wait and risk a longer void. Accepting £25 less for an initial 6-month period is a ‘loss’ of only £150 over the whole 6 months, versus losing over £160 for every week that your property lies empty.
What if you find yourself with a void?
If the current tenancy is almost at an end and you haven’t secured a new tenant, consider dropping the rent. As illustrated above, reducing it by £25 a month is likely to have far less of an impact on your finances than the property standing empty. Have a look at the online rental portals to see how much landlords are charging for similar properties and make yours slightly less.
Then you’ve got to make sure the property really is appealing to tenants. Tenants often site the need for a property to look clean and fresh and don’t particularly like the smell of damp greeting them when they first walk in! If it’s a cold time of year, it may be worth having the heating on low, and do go in every few days to make sure mail’s not piling up. Talk to your local agent to check the property is good enough to attract tenants quickly and maximise your rental income.
Finally, it’s important that you budget properly for voids. With the average being 3 weeks a year, you should make an allowance of 5% of your full annual rental income so that you don’t over-estimate your profits.
5 steps you can take to minimise voids
- Do what you can to keep hold of existing good tenants.
- Start advertising as soon as your tenant gives notice.
- Make sure you’re charging a fair level of rent and the property is good value for money.
- Make sure all your maintenance is up to date.
- Keep the property looking and feeling fresh.
This information has been provided by our partner Mortgage Advice Bureau. For more information relating to Mortgages or for Mortgage Advice please visit Mortgage Advice Bureau.