I've gotten this questions a few times and here's what you need to know about how long it takes to lease your property. This is an economic question and its a supply and demand problem.
how many similar properties are around your investment property, and
how many tenants are in the market in that area
Here is one way for you to find out the current state of the rental market in your area.
I'm actually answering this question right now for a potential landlord so I though I'll write it here for them, but everyone else can see how I go about doing this.
This property is located in Joondanna and based on the 2016 census from reiwa, There are 2,492 dwellings and 43.9% of are rentals. This means
There are 1,094 properties in Joondanna that are rentals
Assuming they are all on a 12 month lease, it means a maximum of 91 properties could become vacant in any one month.
Looking at realestate.com.au today, there are 47 listing in Joondanna. This suggest 44 of the 91 properties (48%) them must have renew and hence are not listed while the other 47 (52%) must be properties where tenants vacated to find something else.
This renewal rate (48%) is pretty much driven by the number of listing in a suburb and a high renewal rate suggests:
demand is high and new listing are being snapped up quickly, or
there isn't enough properties on the market, or
tenants tend to stay longer here, i.e. good amenities, schools etc.
Obviously this will change quickly from month to month depending on the number of listing that is available, but it gives an indication of how the rental market is at any point in time and more importantly allows a basis to compare different suburbs.
I've calculated the renewal rates for a few suburbs as a comparison
Northbridge (14%)
South Perth (16%)
East Perth (17%)
Perth (18%)
Mount Lawley (41%)
Thornlie (42%)
Joondanna (48%)
Como (53%)
North Perth (60%)
Mount Hawthorn (61%)
Scarborough (61%)
From an investment point of view, high numbers are good, low numbers are bad. What you want is to understand this metric over a longer period of time to determine which suburbs is more stable from a leasing point of view over the longer term.
As a rough indication and without considering the type of property, nearby amenities, schools, public transportation, pricing etc. here are some rough indication of how long it will take to rent out a property in the current market:
above 60% is taking about 2-4 weeks to rent out.
between 40% to 60% is 3-5 weeks to rent out.
below 40% is over 4 weeks to rent out.
Where to from here and what can landlords do?
A way landlord can actively choose to improve their individual situation is by understanding the trade off between lowering rent and reducing vacancy.
Below are 3 scenarios for you to think about:
Option 1 is about meeting the market to lease it out quickly (2 weeks vacancy)
Option 2 is being firm with the market and try to get a superior rent (6 weeks vacancy)
Option 3 is being firm with the market and try to get a superior rent, but takes longer than expected (10 weeks vacancy)
Option 1: vacant for 2 weeks and lease at 330pw.
i.e. in the first 52 weeks, you had 2 weeks of $0 and 50 weeks of 330pw
total income = $16,500
base case scenario
Option 2: vacant for 6 weeks and lease at 360pw
i.e. in the first 52 weeks, you had 6 weeks of $0 and 46 weeks of $360pw
total income = $16,560
you are better off by $60 in the first 12m
Option 3: vacant for 10 weeks and lease at 360pw
i.e. in the first 52 weeks, you had 10 weeks of $0 and 42 weeks of $360pw
total income = $15,120
you are worse off by $1,380 in the first 12m
In this example, dropping your rent by $30pw is the equivalent of your property being vacant for 4 weeks. If things take longer than expected, you are worse off.
Note: I am not advocating dropping rent to the lowest bidder, I am merely showing the economic trade off between:
lowering rent to help eliminate prolong vacancy, and
not lowering rent.
A strategy that I have personally seen work quite effectively is to test the market with the upper range in the first week of listing (i.e. 1-2 home opens) and then gauge interest by seeing:
how many potential tenant register,
how many actually attend the home open and whether they show any interest during the home opens,
whether you get any applications. (did they agree to your price or made a low ball offer)
Sometimes you get lucky and you get a good application within that week at your asking price. If there's not enough genuine interest, you drop your rent for the second week do 1-2 home opens then repeat and rinse.
Vacancy is the worse thing that can happen to an investor and price is one of the easiest levers to push and pull. When the market improves over the next 12 months, the rent can be adjusted during the rental review i.e. it can go upwards if the market improves and you don't want to worry about 30pw and be more focus on attracting the best tenant available and reducing vacancy.
If you're still thinking about that 30pw, you will most probably find it easier to save 30pw by refinancing a 500k loan with an interest rate 0.312% lower than your current rate!