Before investing in rental property, it is vital to know what type of tenant is best for you. Have you investigated the different types of people looking to rent and identified the best one for you and your property? If not, here is some useful information and the advantages and possible pitfalls that each market may bring.
The single tenant
With many of us leaving it later in life to co-habit or marry, an increasing number of renters are looking for properties for a sole tenant.
This can have a number of benefits; 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 during inspections, it will be easy to assess if they are sub-letting without your permission.
Do bear in mind, a single renter will usually be relying on one income stream to pay the rent and may only be looking to rent short term as their circumstances can suddenly change. 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
√ Ease of dealing with one person
√ 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 are 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 stability and continuity of schooling.
A family will often have two working adults, 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. Also, 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
Some landlords shy away from the student market but renting to students can have a lot to offer.
It is likely that you will gain 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 also be the security of a Guarantor, 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 offer security
√ 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
Many people have pets but not all landlords allow them, if you are happy to have someone’s pet pooch or friendly feline living in your property, you will be tapping into a market that has limited choices.
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 some possible pitfalls, the potential for damage to your property and garden is increased 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)
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, usually from young professionals.
The key benefits of appealing to this market, is the higher rental return you are likely to receive, especially if you are letting out individual rooms. This also means there is more than one income stream, so major rental arrears can be minimised and void periods managed. On the down-side, conversions to the property may be necessary and increased licensing and legislation (Home of Multiple Occupancy Licence) is likely.
House sharers tend to stick to short-term tenancy agreements, so you will be dealing with a high turnover and the 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
Once you have identified your chosen tenant to market to, you will be able to effectively seek the right type of property for this purpose. For this and any other advice on the rental process, please do not hesitate to contact myself and my team on 01252 514000 or firstname.lastname@example.org.