come the first business day of 2014, ive got 1 notice to leave at end of lease, 2 notices of termination for non payment of rent, 1 thats been vacant since xmas, 1 property thats been vacant for 2 months due to being a bad area and low demand, one call from an agent saying the plumbing has crapped itself, and I need it fixed or the tenant will leave, and you wont find a tenant as the vacancy rate has shot up.
to be frank, im a little scared now with so many potential vacancies, plus another one that is not rented as its been renovated
Hold on tight! It will pass! Offer a reduced rent to entice new tenants, then it's Business as usual.
And I just checked sqm research and and the vacancy for the suburb is 12%! Wow, even I didn't realise it was that high
That is extremely high. I'm presuming it wasn't so, when you purchased it. If that is the case, then you've got a lot of new investor activity in the area. You need to reduce the rent to be competitive. Maybe even offer the first week free.
When you hold a large portfolio, you need to be aware that the rental market moves at a different time to the CG and be prepared to be flexible.
My strategy when I have a good tenant is to never raise the rent, it saves very little and just annoys the tenant. I only review the rent between tenants, or in one case where the tenant was behind in payments for years.
If you are serious about investing in property, you need to treat it as a Business. Maximise your income via rent increases and minimise your expenses, without neglecting the property.
Tenants expect that at some stage rents are going to rise. Especially if they are long term tenants. I review all my rents at regular intervals and increase where possible. About half of my tenants are long term tenants. Some of them look like they are never going to leave.
When times are tough, and vacancies occur, then you move with the times. Lower the rent to market, or if there is a high percentage of vacancies in the area, making your property slightly lower than the competitors will get the properties rented. As the market improves, then the rents go back up.
By keeping your rents low, you are not doing your tenants any favours, as Sash has already pointed out, but most importantly, you are also hurting yourself. Of course, it may make little difference to you if you only hold a handful of properties, and are happily chugging along, not buying any more, but the rental return is a key factor when holding a large portfolio. Consider this for just a moment.
Say you hold 10 properties, and they are all below market by $10pw. $10 isn't a lot, right, but 10 x $10 is $100. So.......you are missing out on $100pw, or $5200pa, for keeping your tenants below market.
If you have 20 properties, this is going to cost you $10400pa.
Now, let's take this a bit further. You have 20 properties that are $20pw below market. This is a whopping $20800pa you are giving away to your tenants.
Imagine what you can do with an extra $20k. I for one am not going to give that to my tenants. It's mine, I want it! $20k can help reduce non-deductable debt, or sit in an offset. It can go towards the deposit of another IP, and MOST IMPORTANTLY it can be used by my Broker when he wants proof of income when looking at purchasing the next one.
I have purchased properties where the Landlord hasn't increased rents. Some can be as far as $50pw below market. Do you know what the first thing I do, when I find this? I use it as a tool to knock a wad of $$ off the purchase price. Another reason to keep your rents at market rates (it will only work in a buyers market, mind you)
