A common problem with a rental property as a source of financial income is vacancy. It’s all well and good to have a nice house, but it still costs money every second of the day and the longer it’s empty the worse it is. One of my properties has recently lost it’s long term tenant and was (almost) vacant. I have been aware of this situation coming up for some time, so I undertook to have a little spending freeze for a bit – no more upgrades to the houses until both were tenanted with folks under contract. I know how much it costs for each place to run (roughly) so I also made the effort to bulk out the account the costs are drawn from, avoiding the situation where the well runs dry and I miss a mortgage or insurance payment. Fortunately a new tenant has been found and they will move in the day after the old tenant leaves. This is ideal and with a 12 month contract even better for my longer term planning.
I think that having a close eye on this sort of thing is really important and the real estate agent I use to manage the property does a very good job of this. They alerted me to the tenant leaving, we worked through a plan to get it re-tenanted and also reviewed the rent costs and any immediate repairs that might need to be effected. I expect this kind of activity as the management of a property should involve this work. My agents have done a great job and I’m very pleased. They have also winnowed through a slew of applications to find what they think is the best tenant for the site.
I have insurance to protect against protracted vacancy too – it’s a large liability to have an empty property (as I well know from my first one being empty for 2 years) and I don’t want a repeat of that situation. I have a system therefore to mitigate this risk to an acceptable level and not get into trouble long term. The system includes the three things I’ve listed so far, but also has a behavioural component to it. That is – I expect to have a certain period where the house is unoccupied. Now this could be for renovations, or simply because the ideal tenant is yet to be found. The flexibility allows my agent time to find the right person and the mindset means I’m not stressed about this. After all, I don’t want to be particularly worried about my rental – I pay for that to be done by the real estate agent. After all, no rent – no pay for them either!
It also pays to be aware of the current market – right now seems an excellent time to get a new tenant in. The market here has lots of tenants and not enough dwellings so it’s relatively easy to get a wide selection of people. This particular property is not high-end and it will cater towards a diverse group of people looking for a home – so we can be careful and choose wisely (hopefully) the person to move in. I’m glad I took the time to plan this out – after all, even the best tenant can vacate if work or personal changes demand it and I’m not out of pocket or destitute while this occurs. The longer lesson is to really be aware of your investment choices, the risks involved and what you can do to mitigate or accept them. Property has a very different risk profile to say index funds or bonds so I think it’s important to be mindful of this. The risk involved is worthy of a separate post so keep an eye out for that in the future. Thankfully this time around, any potential issues have been avoided!