Acceptable Rental Vacancies

Hi there,

Most of us have read books that tell us we should allow for 2 weeks per year for vacancies in IPs but I was just wondering if anyone had an opinion on what should be the target percentage.

The way I see it is the 2 weeks should be what you allow for when working out your finances prior to the purchase but not necessarily a goal.

Obviously 0% would be nice ;) but realistically what do you think is a good goal to aim for or what would be considered "best practice" ?

Cheers,

PIppety
 
I'd be looking at the vacancies in the area you are looking at.

In Sydney, vacancies seem to be about 5%- but < 2% in Canberra. So answers will be different.

I don't know how to relate a city wide vacancy rate to a specific unit.

I'd be planning for the worst- and accepting anything better as a bonus.
 
Hiya

When doing risk and sensitivity analsis with my clients we use a 10 % vacancy rate.

If your investment strategy cant stand that you should stay out :O)

Just my opinion of course.

ta

Rolf
 
Rolf,

It seems good to me to plan for that sort of vacancy. Even if it's heavily negatively geared.

Plan cashflow on that- and anything better is a bonus.

Worse is possible- Pippety needs tokeep an eye on what is happening in the market.

I have a unit in BNE. I'm worried about its future. I bought it for all the worst reasons. But it's been going OK so far. I'll sell if it seems right. Unlikeother properties.
 
Hi Rolf,

I am not really concerned about risk analysis as these are properties I have already owned for a while.

I was more interested in seeing how my properties are performing (long and short term) against averages or perhaps what people in the forum consider to be a vacancy level that they would be happy with or would like to achieve.

I hope that makes sense ?

PIppety ;)
 
Pippety-

The unit is in Tennerife ("The Cannery")

Rental return is fair. Cap growth has not been great- but that's what you might expect for something bought new (read, just after you got excited about the possibilities, but before you knew about the realities).


Geoff
 
Geoff,

I have a unit in Teneriffe also. I think the suburb will continue to perform well. Unfortunately, I am not sure that The Cannery is one of the better developments around the area. From what I know of it the unit sizes are not great ?

In my opinion you will probably still do OK because the area as a whole seems to be getting better and better. The Cannery may still perform because there will always be people who want to live in the area who can't afford to live in some of the newer, more expensive complexes.

There is an interesting (but not so flattering) article on The Cannery at http://www.whichproperty.com.au/which_prop_issue2/thecannery.htm

The short to medium term might be interesting whilst there are still new developments going up but long term anything that close to the city should do OK.

Anyway, just food for thought.

PIppety;)

p.s. I can recommend someone in the area for you to talk to if you want to get an idea of how it's going (if you don't have your own contact).
 
try Residex or the REI to get your vacancy figures. I know the REI puts out quarterly vacancy rates to their member agencies.
 
The REIQ have started to publish a quarterly magazine that amongst other information includes the following:
"Median weekly rents for 2-bedroom units and 3-bedroom houses are also published in the magazine. Derived from the number of bonds lodged for the quarter, the median weekly rents are provided for the major centres around Queensland. 'Queensland Property & Lifestyle' also records the vacancy rate for most major centres in Queensland. "
Go to www.reiq.com.au for more info.
 
Thanks Dionysus,

I am a subscriber to that Magazine so I will have to check it out in the next issue. Must be due out soon as it seems to be a while since the last one ?

PIppety
 
Dear Pippety,

I agree the current issue of 'Queensland Property & Lifestyle' should have come out by now. I subscribe as well.

Sent an e-mail to the editor asking when the next issue is due out but to date have not yet received a reply.

Hope this is not an ominous message of things to come......

Maybe Australian Property Investor would have been a better choice.......?

Cheers,

Sunstone.
 
Sunstone,

I subscribe to both. API Magazine is definitely better. I just subscribed to the REIQ mag because as you know most of us are trying to get as much information as possible and hopefully there will be a lot more QLD / Brisbane specific information.

The REIQ mag seems to have all the stats in each edition which is probably the only reason I can fault API. It has good statistical info but one edition will be rents and the next might be sales prices etc. Would be better if they produced all that data on all capitals in each mag ?

mmm.... seems wierd that it hasn't turned up ? I might send them an email too. I will let you know if I get a response.

Cheers
PIppety
 
Hi

A good site for quick market comparisons of major cities is http://www.quartile.com.au/Market Data/marketdata.htm

I've attached a table in jpg format because I can't insert tables into the message area. The table shows just the vacancy rates of the major cities for the June quarter. No vacancy data was available for Adelaide. Darwin and Hobart data is not on the site.

It is said that when the vacancy rate is 3% the market is in equilibrium. All the rates are above this which means that there is an oversupply of rental accomodation.

Or, look at it another way, a shortage of tenants.

When the vacancy rate gets below 3% it means a shortage of rental accomodation. This is the ideal time to buy because tenants will be easy to find and a tight rental market is usually a prelude to rising house prices as renters seek to buy homes.

Mike

/forums/photopost/data/506/3vacancy_rates.jpg

[ EDIT: moved image to photo gallery and replaced with image link - Sim' ]
 
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