Prevent Tenant Exodus. How Void Periods Affect ROI

Illustration by macrovector_official / Freepik

Tenant retention is a crucial factor in maximising the profitability of rental properties. While void periods might seem like a natural part of the rental cycle, they can significantly impact your bottom line.

Consider (in our previous example) your six-bedroom property with a gross annual income of £50,000. Subtract the running costs of £21,000 and this gives you a net income of £29,000. This yields a healthy 11.6% ROI.

However, a six-month void period in one room (or all 6 rooms having 1 month here and 1 month there) translates to a £4,160 loss in income, reducing the net annual income to £24,840 and the ROI to 9.9% which is below the average 10% ROI you should be at least aiming for.

This example highlights the importance of minimising void periods. Every month a property remains vacant, a significant portion of the running costs remains, impacting profitability.

Reducing tenant turnover and enhancing tenant retention rates is a strategic imperative for any property rental business. The correlation between tenant satisfaction and landlord success is clear: happy tenants lead to happy landlords. By fostering long-term relationships with reliable tenants, property owners can save significant time, money, and stress. However, it is essential to recognise that tenant retention is not solely within your control. Various factors, including personal circumstances such as job relocations or changes in family size, can necessitate a tenant’s departure.

6 Tips on reducing tenant turnover

Despite these uncontrollable elements, there are numerous strategies that landlords can implement to create a more appealing living environment and improve tenant retention. Below are several effective approaches to consider:

1. Outsourcing Property Management

Entrusting property management to a specialised firm can significantly reduce void periods. These professionals possess expertise in marketing, tenant screening, and maintenance, allowing them to quickly identify and secure suitable tenants. By leveraging their network and resources, they can expedite the leasing process, minimising downtime.

2. Thorough Tenant Vetting

A robust tenant screening process is crucial to selecting reliable and responsible tenants. Conducting thorough background checks, credit history reviews, and reference checks can help identify individuals with a history of consistent rent payments and respectful tenancy.

3. Competitive and Fair Rent Pricing

Setting the right rent price is crucial for attracting tenants. Researching comparable properties in the area and considering market trends allows landlords to establish a competitive yet fair rent. Overpricing can deter potential tenants, while underpricing may not maximise returns.

4. Ensure Maintenance a Priority. Be Responsive and Maintain Good Communication

A well-maintained and aesthetically appealing property is more likely to attract tenants. Regularly scheduled maintenance, including repairs, cleaning, and landscaping, ensures a positive first impression. Addressing any issues promptly and maintaining a high standard of presentation can significantly reduce vacancy periods.

5. Regular Inspections

Regular property inspections are essential to identify and address potential issues before they escalate. This proactive approach minimises the risk of major repairs and ensures a smooth transition between tenancies. By addressing minor concerns promptly, landlords can maintain a high level of tenant satisfaction and reduce the likelihood of premature move-outs.

6. Add Value

Small upgrades can go a long way. Consider upgrading dated appliances to modern, energy-efficient models. Providing high-speed internet is another attractive perk, particularly for remote workers or families. Including utilities in the rent can also significantly improve tenant satisfaction by removing the burden of unexpected bills.

Implementing these strategies can significantly reduce void periods and optimise property profitability. By proactively managing vacancies, conducting thorough tenant vetting, and maintaining a high standard of property presentation, landlords can ensure a steady stream of income and minimise financial losses. Remember, minimising void periods is not just about maximising profit; it’s about fostering a positive tenant experience and building a thriving rental portfolio.