The Paradox Of Vacancy And Rent Recovery

The current vacancy rate sits at 3.2% according to SQM research, with vacancies stretching to more than 60 days in some suburbs. This rate varies dramatically according to suburb and property type, but it is not uncommon to see apartments sit vacant for upwards of four weeks. This period is often higher if you have had two different tenants inside a year.

The most vexing question for any landlord is how long can they hold out for the advertised rent? If you have an investment loan you likely tread a fine line between maximising the weekly rent and having as low a vacancy rate as possible. Yet property is meant to be a passive income generating asset. Consider this, an apartment renting for $500 per week generates income of approximately $26,000 per annum if fully tenanted for the year.

The Paradox

Assuming the above for an average property, being vacant for a month costs $2172 in foregone rent. Additionally, a property manager will often charge 1-2 week’s rent for finding a new tenant. If you want to maintain your expected return, then you have 10.5 months to recover the cash loss. The only way to recover this is to increase the rent by $67.50 per week. If the property didn’t lease immediately at $500 per week, what is the likelihood of it leasing at $567.50? This is the paradox of price and vacancy.

Clients of Certainty Property do not suffer from this paradox, as we offer Rent Certainty, where we guarantee a fixed rent, with zero vacancies and zero arrears. Clients of Certainty Property enjoy a truly passive income from their investment properties. We are able to offer this by combining data analysis and exception customer service to guarantee residential landlords their rental income.

If you’re interested in discussing how Certainty Property can assist you, please give us a call on 1300 577 298, or send an email to cameron@certaintyproperty.com.au.