The same thing happens every year as we get towards Christmas, the enquiry rates tend to slow down and the vacancy rate tends to jump. Not very good for investors, very good for tenants… or is it?
Sure, tenants do have the advantage when it comes to this time of year, because there aren’t as many people looking at property, however at this time of year you’ll find tenants may be “rushing” to find a place, everybody wants to be in and settled before the festivities, not just for the reason of being able to invite the family over for Christmas lunch but also because removalists, furniture and household goods are harder to source as it comes to Christmas.
So, what to do if your tenant gives you notice to vacate in December
- Don’t Panic – It’s not a major issue
- Ensure they have given the correct amount of notice, check the lease conditions. (Note: If your agency is closed for the Christmas break, your tenant can still leave during that time even if nobody is in the office to accept the keys)
- Start Advertising – STRAIGHT AWAY. Ensure that the marketing campaign is updated with fresh and appealing photographs and that any minor repairs are completed.
- Give your property appeal – If you have a managing agent they should be ensuring that they a) know what the stand out features of your property are and b) appealing this through the marketing, tenants look for exclusivity, don’t let your property ever look boring in the marketing campaign stages.
- Ensure you are at market rent – When a tenant leaves it can sometimes be tempting to try for a little more than market rent and “test” the market. Normally this is fine, as long as it is heavily monitored by your managing agent and internet marketing specialists, however if you have a tenant vacating over the festive season DO NOT attempt for more than market rent, you will cost yourself more time and money that it is worth. Sometimes investors forget the simple formula when it comes to “testing the market” or “being greedy”
Lets say Jim owns a unit that has a market value of $380 per week, his tenant was paying $370 per week. The tenant decides to vacate with 14 days notice and the Agency advertises straight away, Jim suggests they advertise at $420 per week. After the first 14 days he has not had any enquiry, but he isn’t concerned as the tenant is only moving out now. He leaves it another two weeks, again after no enquiry he decides to drop it to $400 per week, he gets some enquiry but no tenants are applying for the property, so he drops it to $390 per week. Finally after a week Jim has accepted an application and they are moving in a weeks time. Since the previous tenant vacated, and the new tenant moved in Jim has lost $2280 in Market Rent ($380) which he could have potentially had in the first week of marketing, with no change over time in tenant. With the extra $10 a week he is making after 8 weeks of marketing and waiting for a new tenant to movie in at $390 per week it will take him over 4 years to make his money back. Remember, every week you market a property at above market rent, you are losing another weeks market rent.
- Check Applications thoroughly – Just because it’s the festive season and you are getting desperate, it does not mean you shouldn’t be putting in tenants that cannot afford the rent or have a bad rental history. This is something that again, could cost you more that it’s worth.
- Give 6 Month Lease – Unfortunately there is no preventing a tenant moving out, but at this time of year it is a good idea to give 6 month leases, WHY? so that in 6 months time you can renew them on a 12 month and your tenants will not be able to move (easily) over the Christmas break.
If you have any further questions, do not hesitate to ask me. I would like to wish all Landlords & Tenants a very Merry Christmas and all the best for 2014!