Whether you are a seasoned landlord or thinking about becoming one, it is well worth spending time thinking about how to ensure your property secures above average rents and minimises costly void periods; and these days that means thinking about what tenants want.
Protecting your yield has never been more important. The 2015 budget announced the end of the wear and tear allowance and changes to mortgage interest relief. Dealing yet another blow to a landlord’s net yield and bringing yields in London to an all-time low. However, in today’s market it is possible for the savvy landlord to take action to improve an asset’s performance. In this article we explore some simple measures a landlord can consider to boost yields and protect capital values.
Firstly this means understanding your market and getting inside the tenant’s head; understanding their motives and priorities. In central London the lettings market is very dynamic and the typical tenant is a hard working professional, aged between 25 and 40. These people rent, not because they cannot afford to buy, but because renting provides them with the flexibility, the value and the mobility they value.
Based on our data and the insight we have gained through years of providing lettings advice to landlords and listening to tenants, we have noticed 5 trending areas that can help add value to properties and secure above average rents.
- Space and layout;
- Furnished versus Unfurnished;
- Traits of a successful landlord;
Space and layout
Open plan living is here to stay and has redefined what tenants want from the space and how they use it. No longer is the dining room or study a coveted item on the tenant’s wish list. It is Wifi and storage space that are at the top. We regularly see the smaller rooms that a landlord thought would be used as a study, converted into a storage space for golf clubs, surfboards and suitcases or used as a dressing room for the storage of clothes and shoes. So if your lease and building structure permit, consider installing good quality built in storage or think about how a small room might be incorporated usefully into the open plan living space.
When it comes to the property itself, we see a strong bias towards two distinct accommodation types: a period property with original features and modern finishes throughout; and the new breed of luxury apartment blocks with high-spec finishes and on-site facilities; both these groups command an immediate premium.
Furnished versus Unfurnished Properties
Our statistics show that over 90% of tenants want a furnished property, largely because a furnished property provides the convenience and flexibility that the globally mobile individuals who make London their home for work or study want. Few wish to spend time and money shipping their belongings around or kitting out a new home.
In our experience furnished properties let faster. In fact the additional time it takes to let out an unfurnished property and the subsequent loss in rent often exceeds the one off cost of investing in a furnishing package. Finding the right furnishing package can take time but your property consultant will be able to guide you. Like many estate agents we can give advice or arrange for the purchase of furniture. The added benefit of a professionally furnished property is that it shows better and photographs better, which leads to more enquiries from applicants, more viewings and a quicker letting.
We find that properties which are furnished in a contemporary, neutral style let quicker. Tenants appear to hate small leather sofas, single beds and pine furniture. However, they love fold away furniture; sofa beds for guests; and a big bed for themselves. They want items that complement each other rather than an eclectic collection of things from other properties or second hand furnishings from another home. If a property has been furnished with leftovers, it shows and takes longer to let.
Landlords can also add-value by investing in soft furnishings such as cushions, lamps and pictures, adding these simple items tap into the emotional side of the tenant’s brain, connecting the property with the lifestyle to which they aspire. The value of doing this is difficult to quantify but we regularly see the results, it creates the extra push that makes the tenant want to rent your property versus another.
Facilities and Equipment
Tenants want open plan fully equipped kitchens and we regularly see tenants choosing one property over another simply because it has a dishwasher. They want stylish well finished bathrooms and kitchens and ideally the opportunity to cook and entertain. Tenants want a shower and a bath, or a shower over a bath if the property is small; this is more because they like the idea of having the choice rather than any discernible preference.
In practise, the typical young professional tenant works long hours, takes quick showers and heats up ready meals. However, they want to be able to have friends over for dinner, so the ideal property will make this easy and provide a comfortable space to dine and entertain. In many ways these options elude to the lifestyle the individual aspires to rather than the reality of their day-to-day life.
When choosing your investment property or when faced with the need to refurbish, these preferences are worth bearing in mind. Equally, a property with private and usable outside space in the form of a decent seized balcony, terrace or low maintenance garden usually adds a fairly consistent rental premium of around 10%.
Location is always important when considering buying a property to let. Tenants want to be close to work without being too close. Ideally people prefer to walk to work and if they will accept a tube journey it must be a single journey, without changes. They prefer to be close to supermarkets, coffee shops, restaurants and bars, although, they also want the property to be quiet. So if the property is on a main road or close to a pub investing in good glazing is key, reducing noise levels automatically increase the desirability of the property and the amount tenants are willing to pay to live there. If you are looking to buy a property then prioritize those on quiet streets or that have the bedrooms away from the main road.
It is worth noting here that in our experience tenants are not looking to rent in an up and coming area with future potential, unless there is a significant discount to do so. They want instant gratification, which means amenities that are available to them now. Shops, cinemas, new stations that are in the pipeline but not yet completed are irrelevant to them.
Traits of a successful landlord
The most successful landlords make the effort to understand their tenants’ needs and we would advise any would be landlord to seek the advice of their local letting agent before buying an investment property. It is not enough to ask how much rent you can get; you need to consider the motivators of a typical tenant in your target market and understand why and what they are looking for.
At the heart of all their priorities are flexibility and convenience and this flexibility extends to the type of contract. This might include break clauses in case their circumstances change or longer term tenancies so they can safeguard their security in a property. In our areas we are increasingly asked for 18 and 24 month tenancies as opposed to the conventional 12 month lease because tenants want to fix rents and ensure that they are not going to have to move in a year’s time.
Landlords who take the time to get to know their target market and are flexible to tenants’ requests have the lowest void periods and tend to retain their tenants for longer periods. Few things can erode a yield as quickly as a void period so by considering the advice above, investors should gain a good understanding of the central London lettings market.
A reputable letting agency will be able to advise you on ways to increase a property’s appeal. At Hurford Salvi Carr we specialise in the City and Central London and have a wealth of experience on which our clients draw.
For more information about our research data, letting your property or investing in a buy-to-let, click here to contact us.
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