Low occupancy rates and high tenant turnover can convert an investment property into a financial burden.
Every time your buy-to-let stands empty, you lose out on valuable rental income. You will also need to foot the bill for the mortgage on the property yourself.
If you’re already paying a mortgage on your own home and rely on rental income to pay the mortgage on your buy-to-let, then a vacant property could put you in a tricky financial situation with not one, but two mortgages to pay.
Experiencing low occupancy for long periods, or regularly, can negatively impact a landlord’s return on investment.
Understanding the reasons why some landlords contend with with low occupancy and others don’t, can help you to avoid the problem.
In this article, we will find out a little more about why some landlords struggle to find tenants more than others and the steps to take when dealing with low occupancy rates.
What causes low occupancy rates?
The first step towards avoiding low occupancy rates is understanding what causes the problem. Is it something that can be prevented, or is it down to luck?
Here are a few common reasons why some landlords experience low occupancy rates.
Undesirable location – The location of your property can play a part in determining whether it experiences high or low occupancy rates. Properties in desirable neighbourhoods close to schools, shops, and entertainment venues with reliable transport links tend to be in greater demand and enjoy higher occupancy rates. Landlords with properties in areas with high crime rates, noisy surroundings, or limited amenities are likely to experience lower occupancy.
Not understanding their target audience – Landlords who do not understand their target audience may struggle to attract and retain tenants, resulting in low occupancy rates. Understanding the needs and preferences of your target audience is essential for creating an attractive living environment and tailoring your marketing efforts to attract the right people.
Poor advertising – Landlords need an effective advertising strategy to help them to generate awareness and interest in their rental property. If potential tenants cannot find your adverts or do not find them appealing, then you will struggle to fill vacancies, leading to low occupancy rates.
Price – Incorrect pricing is off-putting for tenants. Landlords must conduct thorough research on the rental market, considering factors like location, amenities, and competition before setting their rental rates. Prices that are too high may cause tenants to look for properties that offer better value for money, while those that are too low may cause tenants to perceive the property as having lower quality or value. Prices should be competitive and reflective of the value the property offers to help attract and retain tenants and avoid low occupancy rates.
Property is not appealing – To stay competitive, landlords need to maintain their property to a high standard and consider investing in upgrades or renovations to improve their property’s value and appeal. Properties that lack kerb appeal, do not appear to be well maintained or lack desirable amenities like parking, double glazing, or outdoor space, may struggle to attract and retain tenants, causing low occupancy rates.
How to plan for and avoid low occupancy
Landlords need to know how to attract the right type of tenants and keep them to avoid facing low occupancy.
Invest smart – To avoid low occupancy rates, landlords should invest their efforts into finding the right rental property to begin with. This involves conducting thorough research into the demand for rental properties within an area and then investing in a desirable neighbourhood where low occupancy rates are less likely. Identifying the type of tenant that typically resides in the area will also help landlords to tailor their property to appeal to their needs and preferences, to make their property a more attractive option.
Have a strategy to reduce tenant turnover – One effective way to avoid low tenancy is to keep your existing tenants happy and encourage them to renew their lease when it comes to an end. Maintaining your rental property to a high standard and maintaining a positive relationship with your tenants can help to reduce tenant turnover. When the end of a tenant’s lease is in sight, you could also provide an incentive for them to stay, such as discounted rent or a free month’s rent when they renew their contract.
Budget for void periods – While landlords can take steps to minimise low occupancy, they will inevitably still encounter void periods from time to time. Budgeting for such occurrences can help to minimise financial strain and potential debt. Without rental income, landlords may struggle to cover expenses like mortgage payments, property maintenance, and utility bills. By budgeting for void periods, landlords can ensure they have savings put aside to cover expenses and maintain financial stability, even during periods of low occupancy.
How to deal with low occupancy when it happens
Unfortunately, it’s impossible to eliminate vacant days at your rental property as life is unpredictable and occasionally tenants will need to leave at short notice or drop out at the last minute. However, if your property is persistently experiencing low occupancy rates, then you’ll need to take proactive steps to attract more tenants and minimise your losses.
Act quickly – For every day that your rental property stands empty, you lose valuable rental income, so it’s in your best interests to act as quickly as possible.
Analyse the market – Check out the competition, are any similar properties in the area experiencing higher occupancy rates? If so, what are they doing differently? Analysing the market can help you to identify how you can improve your rental property.
Evaluate your pricing – How does your property price compare to other similar properties in the area? If your rates are higher, it is worth considering lowering your price to help attract new tenants.
Increase your marketing efforts – Are there more marketing channels that you could explore to help you to expand your reach? Consider listing your property on more rental websites or partnering with a local estate agent to help you to increase your rental property’s visibility.
Improve your property’s kerb appeal – Is your property making the right first impression? A run-down or uncared-for exterior could put off potential tenants before they’ve even scheduled a viewing. Consider investing in landscaping or a fresh coat of paint to make your property more visually appealing.
Consider renovating the property – If your property is looking a little worn and tired, a lick of paint could help to revitalise it and make it more attractive to potential tenants. It may also be worth carrying out bigger renovation projects to attract new tenants and increase its value. Adding an en-suite or updating the kitchen could help it to stand out from competing rental properties in the area.
Here at Mistoria Estate Agents, we are proud to be a leading estate agency in the North West of England, with branches in Bolton, Cheadle Hulme, Worsley, Liverpool, and Salford.
Our team helps individuals to buy and sell property and provide landlords with a variety of property management services, including help with low occupancy rates.
To speak to one of our team, give our offices a call on 0800 500 3015.