Having found from recent data that the recession we are now in will see rents fall by at least 5% until 2024, Home Made has provided ten tips to help landlords:
1. Keep existing tenants
They remind landlords that even if they are looking to slightly reduce their rent due to their current financial situation, it’s worth holding onto good tenants.
They say: “If you can afford it, it’s better long term to drop the rent 3-7% and support people that you know will take good care of the place than risk the uncertainty of advertising for let. Especially when there’s no guarantee you will achieve higher rent and you risk lengthy void periods.”
2. Prioritise longer lets and good renters over higher rents
Accepting reasonable offers from renters with good references is better than being trapped in a lengthy void period.
Home Made provides the following example: “On a 2 bed in E14 rented for £2,500 per month, taking a 7% cut to keep a good renter would see you £400 better off over 12 months than if you let them go, and face a void period of a month while looking for a new renter.
“That’s without taking into account the costs accrued across the void period for council tax, utilities, marketing, mortgage, etc.”
They also advise for longer contracts to include a clause allowing you to review rent prices after 12 months.
3. Take out rent insurance
Being proactive can provide you with a safety net in the event that your tenants fall into arrears. Rent guarantee insurance can help in such situations.
Home Made says: “These are harder to get at the moment because of the increased risk, so stringent referencing is a must – not just because bad actors try to exploit slower markets to rent properties, but because it will make it more likely you’re accepted when applying for insurance if you can demonstrate your referencing is thorough.”
4. Consider mortgage payment holidays
These payment holidays are there for those who need financial help, but remember that this only defers the payment. The FCA has confirmed that your credit file shouldn’t be impacted by taking a mortgage payment holiday, but lenders can still take it into consideration when making future loan decisions.
5. Create an addendum for tenancy agreements in the case of rent reductions
If you decide to temporarily reduce the rent to help your tenants, make sure there is a clear agreement. Adding an addendum to your rental contract allows you to clearly state how long the rent reduction will last. If you only plan on deferring payments, specify this, along with details of your agreed repayment plan.
6. Cut costs in the right places
If you are looking to use a letting agent, be sure to ask questions before investing. Home Made suggests asking how they’re finding renters in a tough market and how long their average void period is. Then you can compare their fees with other similar options in the market.
They suggest: “Consider hybrid agencies that use a tech-enabled approach to reduce fees, friction and increase transparency while placing people into properties faster. With Home Made, for example, the average placement takes 8 days, from listing to an agreed offer, 14 days faster than traditional agencies for 60-90% less in fees than competitors.”
7. Point renters towards financial support
Help your tenants find financial assistance support if they are struggling to pay the bills. You can point them towards organisations and experts such as Citizens Advice, who can help them budget, as well as access aid and benefits.
8. Adapt your offering for the new normal – highlight outside and working from home spaces
With outside spaces high on the wish lists for a lot of renters since lockdown began, you will want to highlight such features. The same goes for office spaces.
Home Made says: “Any property with a garden, balcony, roof terrace, or proximity to a park should manage to do well as we emerge from lockdown – highlight these in your listings.”
9. Increase your market by changing your renter profile
You maybe have a preferred tenant type, but consider widening your criteria to help increase your options.
Their example is: “If traditionally you rented your 2-3 bed home to families or couples, consider widening to sharers – focusing on the quality of renter over securing a specific type. With multi-occupant spaces, focus on making the most of larger personal space areas, prioritising spacious and well-equipped bedrooms over living rooms in shared houses.
“That said, make sure to check your local authority regulations before you do anything. Some councils require licenses to be purchased for multiple occupancy households, and these can be expensive, so factor this in before making the switch.”
10. Consider lets with pets
With more people adopting pets to keep them company during lockdown, you might be seeing an increase in renters looking to bring a furry friend with them.
Home Made states: “Landlords willing to be flexible with their pet policy should have an easier time letting their property, as the supply available for pet owners is low.
“They’re generally willing to pay more and it’s worth remembering that renters with pets stay at a property for much longer than those who don’t – around 80% longer – allowing you to recover some lost income with longer-term renters.
“Pets do tend to cause a little more wear and tear, so consider hardwood floors over carpets; and new furniture better suited to withstanding the impact of pets to limit damage to the home.”