Coronavirus has impacted the UK’s economy and rental portfolio of landlords having buy-to-let (BTL) properties are worried about their rental prospects after lockdown.
RentOnCloud, a start-up that specializes in providing rental software services and replacing traditional Highstreet agencies, has laid out the essential steps landlords need to take to protect their investment in the next recession.
1. Stay with Renters who are already occupied
Tenancy renewal is a good option if you have reliable renters. It’s better to lower the rent by 3-7% by supporting the renter community, and onboard people who will take care of your place. A BTL Landlord can risk long void periods if expecting higher rent by advertising for uncertain periods and there is a lack of guarantee that a Landlord will get higher rent.
2. Prioritize longer rentals and better renters over higher rents
Good renters will offer you reasonable deals. A prolonged void period can be more costly than temporary lower rent. If you rent a two-bedroom apartment in London for GBP 2,500 per monthly, a 7% reduction to keep a good tenant would make you GBP 400 more financially better over the 12 months than if they were let go and you face a void period for one month while you searching and advertising for a new renter. This is without considering the cost of marketing, utility, and council tax.
Consider adding a clause to allow you to review the rent after 12 months for longer contracts. This will allow you to review rent prices with your renter at a more natural time.
3. Rental protection insurance
If your renters are in arrears, you can take preventive steps to help yourself. Rent insurance policies will cover you if your renters cannot pay the rent.
These properties are more difficult to obtain at the moment due to the higher risk. Stringent referencing will increase your chances of being accepted for insurance.
4. Take into consideration mortgage payment holidays
Consider taking a mortgage payment vacation if you think you could benefit from one. You are only deferring your payment, and the costs will add up. While the FCA has stated that you shouldn’t have your credit score negatively affected by getting one, lenders may still consider it when making future loans decisions.
Renters may ask to reduce rent during some period, and it will be a mess if you don’t make an agreement. You might consider adding an addendum in your rental contract that clarifies how long the rent reduction will be effective, and if rent is being deferred or canceled. It should also detail your repayment plan.
5. Reduce costs where you can
You want to make sure that you are working with the best people in this market. This includes your letting agent. Ask them questions about their methods of finding renters in difficult markets, their average void period, and compare their fees with others. It is worthwhile to try the RentOnCloud platform who is helping landlords to advertise and manage rental properties and accounting using the online software.
Online agencies can be a better option than traditional agencies. They use tech to lower fees, increase transparency and reduce friction while placing people in properties quicker. Rentoncloud is an example of an online marketplace that takes only a few days from listing to accepting offers. This allows for faster placement and costs 60-90% less than traditional agencies.
6. Financial support for renters point of view
Renters who are having trouble paying their bills should be aware of the financial assistance available. You can point them to experts and organizations that can help them access benefits and budgets. Citizens Advice is a good place to start.
7. Adapt your offer to the new normal. Highlight outside and WFH spaces
Renters are now looking for outdoor space. People have come to value outdoor space after being forced to spend so much of their time indoors. Every property that has a garden, balcony, or roof terrace, or is close to a park, should do well when we come out of lockdown.
8. Change your prospective renter profile to broaden market demand
Many landlords have a list of requirements that they are looking for renters. These requirements can be changed and diversified.
If you have rented your home with two to three bedrooms to couples or families, it may be worth considering opening the door to other renters, or renters having pets. Multi-occupant (HMO) spaces could be maximized. This means that you will prioritize spacious, well-equipped bedrooms and less shared living areas.
However, you should always check the regulations of your local authority before doing anything. You may need to purchase licenses for multiple occupancy homes from some councils. These can be costly so make sure you factor that in before making any changes.
9. Be pet friendly
Many people have felt lonely over the past months, and renters are seeking companionship in the form a pet cat or dog. Because there is a limited supply of pet owners, landlords who are flexible with their pet policy will have a better chance of letting their property. They are more willing to pay more, and it is worth noting that pet-owners tend to stay longer at their property than renters without pets – about 80% longer. This allows you to make up some income by renting to longer-term renters.
Pets can cause more damage, so hardwood floors are better than carpets.