Property Investment
6 min read
Author: Tiffany Bracey
Property Manager Team Leader at Opes Property Management Auckland.
Reviewed by: Tom Greene
Business Development Manager with 5 years Property Management industry experience. Property Investor in Christchurch
One of the most common fears first-time investors have is: "What happens if I can't find a good tenant?"
After all, most people can't afford to pay their own mortgage … and an investment mortgage as well.
That's why a lot of investors say to me: "Be honest with me, Tiffany how long will my property be empty?"
In other words, how long will my property be vacant?
That's both when you first buy a property … and then when you have tenants moving in and out.
Based on my experience, properties only tend to be vacant (empty) for 2 to 6 weeks at a time. But, there are instances where it takes much longer (up to 8 weeks).
It depends on a few factors, which you're going to learn about in this article.
I'm also going to share live data from Opes Property Management. This data updates every week and shows how much vacancy property investors are experiencing right now.
That's why we show you how we are performing, both when the data is good ... and when we’ve got work to do.
Here is the live data about whether we are meeting our Key Performance Indicators (KPIs) or not.
🟢 means meeting target. 🟠 means we are close. 🔴 means we've got work to do.
There are two times when your property might have a vacancy.
Auckland: 6 weeks | Christchurch 4 weeks
You'll usually have more of a vacancy period when you find your first tenant.
You often need to pay for (settle) your property before you can get in and show tenants around.
Today, most property investors have 4 weeks of vacancy (or less) in Christchurch.
In Auckland, we aim for 6 weeks of vacancy (or less).
Here is the actual data from the Opes Property Management team. Our goal is that 70% of investors meet these targets (4-6 weeks of vacancy).
Why 70%?
Well, we don’t just want 50% of investors to rent their properties that fast.
We want a supermajority of investors, over two-thirds, to find a tenant that quickly.
So are we meeting this goal?
Over the most recent 4 weeks in Christchurch 71% of property investors found a tenant with 4 weeks of vacancy or less.
That is 1% above our goal of 70%.
If we look in Auckland, again, in the most recent 4 weeks 71% of property investors found a tenant with 6 weeks of vacancy or less.
That is 1% above our goal of 70%.
We don't always meet the goal. For instance, over the Christmas period there is often more vacancy. But, I believe it's important to be transparent and show you what the numbers actually look like.
That way you'll have the right expectations around how long it might take for a tenant move in.
More from Opes:
Auckland: 4 weeks | Christchurch 2 weeks
After you get your first tenant, you usually have less vacancy.
Your tenants will give you notice before moving out. That gives you time to find a new tenant and show them through the property.
Sometimes, you'll get no vacancy at all.
That happens if one tenant moves out, and a new tenant moves in the same (or next) day.
In the past, I've always said to allow 2 weeks of vacancy per year. This is a fair assumption for a city like Christchurch.
However, in Auckland, we currently aim for 4 weeks of vacancy (or less).
Again, our goal is that 70% of investors meet this threshold.
So, how are we doing right now?
Over the most recent 4 weeks (in Christchurch) 83% of property investors replaced their tenant with 2 weeks of vacancy or less.
That is 13% above our goal of 70%.
If we look in Auckland, again, in the most recent 4 weeks 47% of property investors replaced their tenant with 4 weeks of vacancy or less.
That is 23% below our goal of 70%.
The first step in finding a tenant is listing the property online.
At a minimum, your property manager should list the property on Trade Me and realestate.co.nz.
The next step is getting people in to view the property. Usually, you'll hold group viewings (open homes for tenants).
From this, some tenants will apply to rent the property.
Your property manager will then review the applications to choose a few to do more checks on.
This includes:
When the right tenant is found, the property manager will confirm they're moving ahead with the tenant's application.
If the tenant is still interested, a moving-in date is set. In a moderate rental market (neither hot nor cold), this will take 1-2 weeks to complete.
It usually takes another 2-3 weeks before the tenant moves in.
Many investors ask the question: "How long does it take to find a tenant?"
That's often the wrong question to ask. Because you can find a tenant in 1 week. That's quick. But, if it takes them 8 weeks to move in, you could still have a lot of vacancy.
That means you're paying the mortgage rather than the tenant.
So, it's better to think in terms of 'vacancy', i.e. 'how long will my property be empty?'
As mentioned earlier, most properties have 2-4 weeks of vacancy between tenants.
However, this changes frequently. Sometimes landlords read this article and say: "But my property has 6 weeks of vacancy. You said it would only have 2-4 weeks."
Yes, 2-4 weeks is a good conservative estimate. Over half of properties usually find a new tenant in this time. But, there is still a small percentage that will take longer to rent.
Your property could rent more quickly, although it could rent more slowly.
Here are two case studies to show both situations:
A property manager I spoke to in Christchurch once rented out a 4-bed, 2-bath home in Halswell within 7 days.
The market was hot, with no comparable rentals available. 10 people showed up to the viewing and there were 8 applications on the first day.
The tenants signed on Friday and moved in by Monday.
This is the absolute best-case scenario. The tenant moved into the property within a week. However, this is NOT the standard scenario.
Here's a story where the opposite happened.
A 2-bed, 1-bath townhouse in Waltham, Christchurch, took over 2 months to rent. It was listed during the holiday season with heavy competition.
At the time, there were 58 similar properties on the market.
The property manager tried all the tricks in the book: extra viewings, better photos, and even lowering the rent.
Tenants kept applying for the property. But, then they kept 'falling through'.
It took 8 weeks to find a tenant and then have them move in.
As a landlord, there are ways you can speed up (or accidentally slow down) the process of getting a tenant.
But some things are out of your control.
A slow or a hot rental market will have the biggest impact on how long it takes to get a tenant.
If the rental market is hot, finding a tenant will be faster. And vice versa.
This is largely out of your control but it's a major factor.
Similarly, if a tenant's application falls through, you might have to start the process again.
On top of that, existing tenants can slow the process down in both directions. A new tenant with long notice periods can delay move-ins. Whereas existing tenants need 48 hours' notice to allow new tenants to come in to view the property.
Sometimes tenanted properties can take a bit longer to rent because of access restrictions from the current tenant. It's time-consuming having to work around work and family schedules compared to an empty property.
And don't forget, a property filled with mess and packing boxes from a moving tenant, can make your property a little less desirable looking.
But sometimes property investors shoot themselves in the foot. They get an application. Then they wait for a better one to come along.
The issue is that the rental market moves fast.
Tenants aren't just applying for your property. They're applying for other properties too. So, if you are slow to approve a tenant … another property investor might snap them up instead.
If you're flexible on move-in dates too (better to wait a few days for the right tenant, than an extended vacancy), and allow pets ... you'll often find getting a tenant much easier.
The rental market changes from week to week. That's not an exaggeration.
Some properties will see 25 applications in a single day. Others will see none. It all depends.
Two to 3 years ago, things were more clear-cut. The market was busy in summer and quiet in winter.
Now, it's week to week. Some weeks are hectic, others are quiet.
While your property manager will do their best to work with the market they have, you need to know that the market will sometimes be quiet.
Property Manager Team Leader at Opes Property Management Auckland.
Tiffany is an experienced property manager who understands the importance of strong systems to deliver top-tier service. She is committed to staying ahead of the ever-changing compliance requirements under the Residential Tenancies Act 1986.
