Property Investors: How to build a rental portfolio with the future in mind 7 Jan 2022
The pandemic has changed a lot of things, not least the property landscape in the UK. A lot has changed about rental markets, which has had a knock-on effect on property investors and where they’re looking to invest their money.
One of the most notable short-term changes was what tenants are looking for in a property. Being under lockdown in the UK brought living spaces into sharp focus, and caused a steep rise in tenants looking to move to a property with outdoor space with searches for flats on Rightmove declining in February 2021, replaced in popularity by two-bed semi-detached properties to rent.
Although the search for city properties is returning to normal, it demonstrates the focus that the pandemic placed on the living situations for tenants.
The security of longer tenancies
There has been a shift over the last ten years, with attitudes of tenants swaying towards longer rental agreements. A study carried out in 2016 by the Deposit Protection Service (DPS) revealed that more than 80% of the 40,000 tenants interviewed would want a tenancy agreement longer than 12 months.
This desire for long-term tenancies is also reflective of a rise in average tenant age across the UK. With more and more people entering and relying on the Private Rental Sector (PRS), older tenants who are looking more for stability and laying roots in a location will find a greater benefit to longer rental agreements.
For long term property investment, this can actually be a great benefit. Longer tenancies mean reduced void periods and a reduction in the amount spent on finding and referencing new tenants, as well as being able to find serious renters who are looking to make your property their home long-term and are therefore more likely to look after it.
Tenants are willing to pay more
With lots of competition on rental properties at the moment due to an increased demand accompanied by fewer rental properties on the market, data suggests that tenants are willing to pay a higher monthly rent for a better specification of a property. This again ties in with the lockdowns highlighting to tenants how important their homes are and how it makes them feel.
There has also been a rise in flexible and home working since the pandemic, so being able to provide an area, whether that be a garage conversion or structure in the garden, to make it both possible and pleasant for tenants to work from home, could mean higher rental yields.
What does this mean for long-term property investors?
When choosing a property to invest in, take a look at renovation opportunities and take into consideration how these could affect your yields. Look at providing properties tenants will want to live in for a considerable amount of time, including things such as outdoor space and an area separate to the living space making it easy for someone to work from home.
What about short term investment?
While generally, those looking for property investment are in it for the long haul, emergency legislation brought in to protect tenants during the pandemic banned evictions, which caused problems for some landlords who were unable to sell their property. This has understandably left some investors who are thinking about the shorter term a little uneasy.
This accompanied by the rise in people holidaying in the UK, could both be contributing to the rise in short term holiday lets which have increased in popularity with investors over the last two years especially.
To make the most of your investment, you need to consider two things:
- How long you are prepared to have your money tied up in your portfolio? This will help you decide between long and short term lets.
- For long term investments, consider what tenants are going to find most valuable from a property. Really thinking about how people are looking to live in the long term, will help you to achieve great rental yields for a longer period of time.
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