Voids are one of the most difficult issues buy to let investors and landlords face. In this article Property Insider looks at what voids are, how to avoid them, and what to do if you have letting voids.
What are voids?
A void is any period when your property is not occupied by a rent-paying tenant. An element of void is unavoidable, eg. when one tenant moves out and before another tenant moves in. Most landlords regard a void period as a period when a property is empty and there is no tenant willing and able to rent it.
Why are voids a risk to property investors?
Voids eat into your yields, and can make your investment unviable. For example, £200,000 property let at £950pcm x 12 = 5.7% yield. £200,000 property let at £950pcm x 7 = 3.3% yield.
Imagine a shop which has no customers for two or three months of the year – voids are potentially that serious.
There are other risks too. An empty property will deteriorate, especially in winter, and may be subject to vandals or squatters. The insurance cover will be inoperative after a period, if not immediately.
Are there any positives to void periods?
Not really. It is easier, much easier, to relet an empty property. Also, void periods are an opportunity to do maintenance or make improvements without having to make other arrangements for the tenant. With a creative approach, it may even be possible to relet the property at a higher rent.
The best way of avoiding voids
The best way of avoiding voids is when you buy, not once you’ve bought! As always in property location is the key here – properties in areas with high demand and limited supply experience few voids. However, also consider the type of property, ie. size, quality and letting value relative to the local market.
Do your own research. Local letting agents are also very well placed to advise on local demand and supply.
Once you’ve purchased monitor the local market. Remember that property market supply and demand trends change over time. Try to ensure your property always sits within that desirable zone where demand is high but supply is limited.
If you experience an abnormally high level of voids, what might the best course of action be?
1. Is your rent realistic? Avoid reducing the rent automatically as a knee-jerk reaction however as it could be a backward step that could affect the long term profitability of your investment.
Do your sums! It’s difficult to deny though that 12 months at £600pcm produce a significantly better return than 10 months at £650pcm.
2. Consider if offering a 1/2/3 month reduced rent period might be a better option. It could avoid compromising your yields long term. Handling the letting yourself rather than using an agent could also reduce the cost to tenants and make your property more lettable even at your current level of rent.
3. Is your property up to standard – for the market you are targeting? Does it need to be improved or updated?
This can be a particular problem if you bought a new build property several years ago, or newly refurbished your property when you first let it. (Note to self: New or newly refurbished properties always let better and this is not always representative of their long term potential.)
Again, avoid a knee-jerk reaction as a refurb might not be the answer either and could even lower your returns or make your property less lettable. Look at what properties at similar rent levels are offering.
4. Should you target a different market or markets? For example, student to family, family to student, single family to shared accommodation.
Could you move into short term/daily rentals? Is your property suitable for the holiday letting market?
Ultimately, consider whether the property should remain part of your portfolio or not. Properties with high levels of voids are of little use to the professional buy to let investor.