Have you identified your target tenant? Before investing in a rental property it's vital to know who you're appealing to, plus the potential pluses and possible pitfalls that each particular market may bring.
With many of us leaving it later in life to co-habit or marry, an increasing number of renters are looking for single-person properties and this tenant type can offer a number of useful benefits.
Co-owner of Belvoir Melton Mowbray and Belvoir Bingham, Charlotte Baker, explains: “As only one person is living at the property wear and tear is likely to be minimised, meaning less maintenance expense. Alongside this you will only have to build a relationship with one person and only have to chase one person for rent. In addition, during inspections, it will be easy to assess if they're sub-letting without your permission.
Do bear in mind, however, a single renter will usually be relying on one income stream to pay the rent and will often offer only a short-term solution as their circumstances and relationships can suddenly change leading to new living requirements. Alternatively, they may want to move someone in during the tenancy which will mean additional reference gathering and a new tenancy agreement.”
√ Minimal wear and tear
√ Only one rent payer to chase
√ Easy assessments regarding sub-letting
X Their relationship status (and living requirements) may suddenly change
X Only one income to pay the rent
X A new tenancy agreement will be needed if someone moves in
Married with children...
If you're looking for long-term tenants then targeting the family market could be the answer.
“Many people with young children will want to make a lengthy commitment to a property in order for their children to have continuity of schooling and the security of a familiar home,” says Charlotte.
A family will often have two working adults too, so they won't be relying on the income of a single person to pay the rent. Additionally, they are likely to have been homeowners previously and will know how to look after a property and what maintenance issues to look out for. They will want to make your house a home.
Remember, though, the amount of wear and tear is usually proportionate to the number of people who live at a property therefore your maintenance bills may be higher than if you were letting to a couple or single renter. Plus, the requirements of a family are usually more extensive, such as the need for a garden and 3+ bedrooms, so your initial capital outlay is likely to be increased.”
√ Likely to make a long-term commitment
√ Usually more than one income
√ Have often been home-owners previously
X Increased wear and tear and maintenance costs
X Property purchase price of family house investments is likely to be higher
X Longer wish list of requirements and needs
Students on site...
Some landlords shy away from the student market but renting to students can have a lot to offer.
Charlotte comments: “You'll generally get a commitment for a full academic year and there will be multiple people paying rent so the overall rental return is likely to be high. There will be a Guarantor too, which is usually a parent.
Of course, a possible challenge is that a student is unlikely to stay for longer than their course duration and some student landlords do report high maintenance and cleaning bills between tenancies.”
√ Guarantors can be chased
√ Possible higher rental return
√ Generally stay for the minimum of an academic year
X Unlikely to turn into a very long-term tenant
X Noise issues sometimes reported
X Potential for higher maintenance and cleaning bills
Pets in your property...
Many people have pets but not all landlords allow them so if you're happy to have someone's pet pooch or friendly feline living in your property you'll be tapping into a market that has limited choices.
Charlotte continues: “Because a pet owner's options are reduced most will be looking for long-term tenancies, which is great news for landlords. Obviously there are possible pitfalls, though. The potential for damage to your property and garden is increased, pet smells can linger long after the pet has moved out, as can fleas, and some pets can be noisy and cause complaints from neighbouring properties. Also, a large dog for example, can make essential access tricky for contractors, inspections and further viewings.”
√ Added security for the property (ie, if a dog is present)
√ Pet owners are often looking for long-term living solutions
√ Broadening your potential market
X Potential for damage to the property and garden by the pet
X Access could be difficult for tradesmen, the landlord and potential new tenants (depending on the type of pet)
X Pets don't pay any rent!
A full house...
With rising rents and increased living costs many people are teaming up to settle down. House sharing definitely isn't just for students anymore and many rental enquiries are received from people looking for house share opportunities, from young professionals to recent divorcees.
“The key benefits of appealing to this market is the higher rental return you're likely to receive, especially if you're letting out individual rooms. There will be more than one income stream too, so major rental arrears can be minimised and void periods managed. On the down-side, however, conversions to the property may be necessary and increased licensing and legislation is likely.
House sharers tend to stick to short-term tenancy agreements too, so you'll be dealing with a high turnover of tenants and the associated costs and wear and tear that goes with people frequently moving in and out of a property.”
√ More than one income
√ Higher yields, especially if letting as individual rooms
√ Large target market
X Often short-term tenancies
X High turnover of tenants and the associated costs
X Conversions to the property may be necessary