Extended Vacancy

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From: Mr S


Hi,

Have posted a similar message in meeting point by mistake. Am new to this forum. Anyway have just settled on a brand new unit in Bankstown Sydney. My agent has actively been trying to secure a tenant for 5 weeks now with no luck. Our property is vacant along with many others.

Am I getting impatient or would lowering the rent be the answer... we have already lowered it and the agent insists on leaving it at that level. I however believe that half a biscuit is better than no biscuit... anyone out there had similar problems, and how did you overcome them.

Cheers - Martin
 
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Reply: 1
From: Paul Zagoridis


Hi Martin

Been there done that. But every time my reaction is different. Currently I think every week vacant you lose say $280 (or $40 per day)

Drop the rent $10 and you give up $260 over six months. I'd drop and get a tenant NOW.

I'd also tell the agent to get me a tenant NOW or I'll open it to other agents AND give the agency away.

Five weeks vacancy is UNACCEPTABLE in Sydney. It means tenants are finding better units cheaper elsewhere.

Dreamspinner
 
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Reply: 1.1
From: Glenn M


Martin,

Don't despair, I thought as much as you when I purchased a property in Hawthorn and tried to rent it out. It was vacant for five weeks as well. I kept thinking to myself..what is wrong with my property...especially when the place had just been renovated and I was only after $210 a week for a 2 bedroom apartment with carspace.

In the end I had to settle for $190 and the tenant wanted a six month lease. The lease expired around January this year. This time around it took just 2 days to rent the Property (on a 12 month lease).

The moral of the story, if rentals are slow DEFINATELY drop your price $10-$20 per week (better than losing $200 + per week). Further, as was previously advised, provide a 6 month lease (aim for January-March expiry) which can be more attractive to tenants.

Additionally, put extreme pressure on your Property Manager (Real Estate Agency) to find a tenant ASAP. Ring them every second day and nag the hell out of them (it works!!!). You may even want to negotiate the Letting Fee and suggest that their lack of effort has cost you $240 X 5 weeks = $1,200 : Are they going to compensate you for your loss? You'll find that they will say that it is because of market conditions blah blah blah. and it is not their fault. You'll find that they may forego the Letting Fee (try it). If worse comes to worse find another agent.

I think I'm just rambling on now....better go!!!

Hope I've helped.

Glenn.
 
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Reply: 1.1.1
From: GoAnna !


Does your agent just hand out keys or do they take tenants through and actively promote your apartment? Are they advertising in the newspaper or waiting passively for a tenant to read their rental list stuck on their front window.

A proactive strategy can make a huge difference.

GoAnna !
(aka Anna before she got real)
 
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Reply: 1.1.1.1
From: Jack Moro



Anna's got it right again.
Get your agent working for you.

Jack
 
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Reply: 2
From: Jeanette .


I've got the same problem. Just finished building a beautiful new house at Campbelltown and it has been vacant for 6 weeks. I'm not the only one. The local papers are full of rentals that have been available for as long as mine. I have never had an investment property vacant before. It is a bad time at the moment because everyone is taking up the first home owners grant and buying their own properties. I read in the paper that vacancy rates are the highest they've been in years.
 
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Reply: 2.1
From: Robert Forward


Hi Jeanette

This same issue is starting to effect right across the board in Sydney. Inner Sydney apartments are already having problems getting tenants, I know the rents in my area (St George) have dropped due to lack of demand for rentals.

My whole thought on what I am seeing is there is a correction in the market not far away. Which Sydney is in dire need of. Once interest rates start there climb again and people that have over extended in mortgages start finding it hard to service there loan then we are in for a roller coaster ride.

For those that say it won't happen, well, maybe your right, but I say it's happened before why won't it happen again.

So what are others thought on this??

Cheers
Robert


Note: This is only my thought and may not occur so no legal suites my way thanks.
 
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Reply: 2.1.1
From: Sue J


I received a letter yesterday from our agent on the Central coast. Luckily we haven't been effected (yet)...in part it goes like this...
"There is an enormous vacancy rate on the CC due mainly to the amount of development which has occurred here."

Seems the first home owners grant is having an effect in many areas.
I know this doesn't help you Martin but it does give an indication of what is happening in many areas.
This is my opinion only.

SJ
 
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Reply: 2.1.2
From: Rolf Latham


Hiya Robert

Residex data will show that rental returns are almost correspondingly affected in the negative during periods of strong capital growth.

In some postcodes there is strong evidence that when growth is flat rental rates run around the 7 to 9 % mark.

When the market is on a strong growth then rates come down to 4 to 6 %.

Quite possibly vacancy may simply because the rents being asked are too high for a high growth market, where cap growth compensates for rent return.

Ta

Rolf
 
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Reply: 2.1.2.1
From: GoAnna !


I rented a property in out this time last year and for the first time ever could not let it immediately. : (

My understanding of the situation was that it was an off peak rental time and that the market was flooded with properties completed just prior to GST. I improved my situation by changing the lease cycle to end in January and do not anticipate the same problems when the time comes to relet.

The good news was that I did have a tenant in within 2 weeks and at a higher rental than I had hoped for. I believe this was due to the unique features of the dwelling. After tenants had a look around they realised here was nothing comparable and were prepared to pay that little extra..


(aka Anna before she got real)
 
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Reply: 2.1.2.1.1
From: Felicity W.


I had a similar situation to GoAnna, property completed and came on the market around July, quite a few vacant units all at the same time. July is apparently about the worst month in Melbourne for renting! I let it go for 4 weeks with a sole agent, then brought in another one. 2 weeks later the original agent rented it out.
Of course, the tenants then broke the lease in January, but in some ways that works out better, at least the new tenancy will end at a different time to everyone else.
Keep smiling
Felicity :cool:
 
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Reply: 2.1.2.2
From: The Wife



Ummm...what does that all mean Rolf?

TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 2.1.2.2.1
From: Rolf Latham


Hi Tw

I dont like "oversupply" because it implies a generalisation of the market which is not accurate.

You can always get a tenant if you come to market, now if you buy into a cookie cutter complex dont be surprised if at least initially you are rentless for a while, 400 units competing for tenant at the same time is interesting !

I any case 5 weeks in a year is around 10 % vacancy, if you are working your cashflow numbers on much less than this maybe you need to reassess your risk management.


Ta

Rolf
 
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Reply: 2.1.2.2.1.1
From: Bydntsel .


The way it is.

Have an IP that I gave it to an agent to rent.

Three weeks later changed agents.

New agent advertised on the net. It was let within one hour.

Twelve month later that agent took two weeks to rent it (they still use the net ).

Different people different results.

Same people different times different results.

The only constant is change.

Follow your own advice
 
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Reply: 2.1.2.1.2
From: Michele B


Same here GA! Can normally conduct a mini auction for rentals for inner ADL IPs, esp character houses. But it's quieter at present for all the reasons outlined in this thread. I think timing is an important one that's never really concerned me before but I will now synchronise my rental terms with Nov - Jan when people tend to move more.

(Interestingly Adelaide cbd commercial vacancy rate has fallen from 20% in mid 90s to 15% end of 2000 to 11% current)

Michele
 
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Extended Vacancy/Become a Developer

Reply: 2.1.2.2.1.2
From: Gee Cee Cee


Hi Jeanette

I do not know the market in Campbeltown at present but have previously had houses in Camden.

I imagine the home is a project style home from one of the major builders.

Would there be any profit in it for you if you were to sell the home. Or would you only receive back the $ it cost?

If you could pull $10 - 25k profit out now you at least have that .

(Will the area go up in value if there are so many homes available is I guess the big question?)

Market it towards a first home buyer who can receive the grant.

You can then either do another one or sit on the money and attend some Mortgagee auctions sometime down the track.

Vacancies are pretty common at this point of time in a property rising market.

As mentioned in one of Jan's books: All the developers that have been out west droving cattle suddenly come back and start building & developing.(Something like that)

Even the mums & dad's get in on the act. Soon there are new homes/units/etc going up every where. Eventually Supply outstrips Demand and a backwards auction of rent $ pw can occur.

It can become even worse once interest rates rise. The cycle goes over the top and drops
in demand grow again. A lot of people that would have rented stay at home with mum & dad or share places.

Just an opinion. As I mentioned I do not know that particular market or area that well.

Regards

Gee Cee
 
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Reply: 2.1.2.1.2.1
From: GoAnna !


Michele

Is the falling commercial vacancy partly related to conversion of commercial premises to residential thereby absorbing the vacancies? I have observed this happen in Melbourne CBD over the past few years and this has now created a tighter commercial rental market.

GoAnna !
(aka Anna before she got real)
 
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Reply: 2.1.2.1.2.1.1
From: Michele B


Some definitely would be GoAnna as many character factories and warehouses are being converted for loft-style living. But many of those were occupied until refurbishment so I suspect that excess office space created in the late 80s (when ADL's skyline was littered with cranes) is now being taken up. Also, many small businesses are finding ADL a competitive and convenient location to operate from and some big businesses (eg BHP Service centre) have recently set up in ADL. Apparently all premium office buildings are fully occupied.

Michele
 
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Extended Vacancy/Become a Developer

Reply: 2.1.2.2.1.2.1
From: Jeanette .


Well what's happened is that I did try to sell it. The agent didn't put much effort into it because he also represents developers whom I believe probably give him repeat business (of course I'm saying that because he didn't achieve a result for me - sour grapes). I've built in a new development where every builder/developer had the same idea as me. Build and sell - with the result that there were too many houses in my street (long street)for sale at the one time. So now I've decided to hold onto it because I believe that when excess supply is taken up, it will be worth more. Now that I've decided to keep it, I've put a bit of effort into making the house last longer - I've waterproofed the showers so that I don't have problems with leaking showers in years to come, and I've put extra drains around the yard to ensure no water problems etc. I've now used this house to finance my next project so I've tied myself into 3 years fixed term loan, so that is another reason why I won't sell now. I'm sure I've just hit a bad time in the market and things will revert to normal again as soon as all the first home buyers have taken up their grants and things revert to normal. Bye for now.
 
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Extended Vacancy/Become a Developer

Reply: 2.1.2.2.1.2.1.1
From: Michael G


Peoples,

What about shared accomodation? More and more people are single, what does your local paper have to say about the demand for shared accomodation?

Two subleases may be worth more than 1 lease?

Just a thought.

Michael
 
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