Whether you are renting a single occupancy property, or you have a House of Multiple Occupancy (HMO) and are sourcing tenants, you need to understand what it is they’re looking for. Ideally, you should target tenants according to the location of your property, and then ensure that the property and your tenancy agreements are set up to maximise returns and minimise tenancy void.
Recent surveys suggest that most landlords prefer not to rent to tenants on benefits, with students also proving an unpopular demographic. However, some landlords have enjoyed considerable returns by renting to these groups, so there are benefits and pitfalls to offering tenancies to all groups.
Students are often thought of as high risk tenants. They are considered financially unstable, have little experience renting or living in their own accommodation, and they may leave property in a worse state than they found it. However, they are also easy tenants in some respects. They don’t have high expectations, which means that your property doesn’t have to have the latest refurbishments and your portfolio can be made up of property in less expensive areas in the right towns and cities.
Expect tenancy void out of term time, and include this in your rental calculations. Despite this, student lets can attract a very good yield, with yield rates reaching as high as 10%, possibly even higher in student HMOs.
When renting to students, consider asking for a guarantor and always take an in-depth inventory before and after every tenancy. You should also expect late nights and loud noise, so avoid renting to tenants in areas where this will cause dispute with neighbours.
At the other end of the scale are elderly people. There are exceptions, but elderly people are less likely to default on their rental payments. They also tend to be polite and easy to work with, although they will have a very clear understanding of their rights and may need more assistance with smaller jobs than other tenants.
If you are willing to go the extra mile to provide elderly tenants with good quality accommodation and provide help when they need it, you will find that they remain loyal tenants for a long time. Elderly tenants are also less likely to need to move away for work or because of an extending family.
You may need to pay extra for refurbishments, for example to include grab rails and ramps at the property. This could restrict you when it comes to finding future tenants, and elderly tenants will want peace and quiet and a safe living environment, so location is important to them.
Single parents may or may not have their rent subsidised with local housing benefits, but in either case they can be highly reliable, long-term tenants. Single parents usually look for good quality accommodation in a decent neighbourhood and that has good access to local schools, parks, and other amenities that are suitable for children.
Single parents are usually looking for a long-term home, and they will keep the property safe and clean for the benefit of their children. A lot of single parents are looking for a blank canvas, so if you are prepared to let them decorate and personalise the property, you will increase the likelihood of these tenants staying for a longer period of time.
Stability is important to this group. They want somewhere safe and peaceful and while some are willing to share living space, most single parent families are looking for self-contained flats or small houses, rather than HMO accommodation. But, there are exceptions to this rule.
Professional couples and individuals offer both benefits and pitfalls. They usually have the finances to keep up with rental payments, but their jobs may demand that they move away later during the tenancy period. When a professional couple has a family, they may look to upgrade or upsize to a bigger property, too.
This group has higher demands when it comes to quality of property and its contents, so expect to pay more to attract this tenant. However, this also means that you can charge a higher rental.
Professionals are very popular with HMO landlords, especially in or near cities and areas of employment.
Families are one of the most common types of tenant in the modern age. Fewer families can afford to buy a home, because of escalating property prices and because mortgages are more difficult to arrange. Tenancies can last for many years, but families can be demanding tenants, trying to ensure that they have a safe environment for their children. They will also want the most desirable locations, close to schools as well as places of work and amenities for children and for the family as a whole.
Working families tend to have very good levels of disposable income but little time to make repairs themselves. While you might be expected to keep on top of repairs and make improvements here and there, the rental yield should more than make up for the time and effort.
DSS is an outdated term, but many landlords still use it to refer to any tenant that is on housing or other benefits. These tenants are the least popular with landlords, although not normally as a result of the tenants themselves. The individuals may not be responsible for making rent payments, with money coming directly from the government, but landlords are extremely sceptical about the rental payment system in its current state.
While working professionals and other tenant groups pay in advance, so at the beginning of a rental term, DSS payments are made at the end of a tenancy term. There are other problems, too; rental payments are sent out every 30 days, rather than every calendar month. Local councils can be difficult to deal with, and are rigidly stuck when dealing with any applications or problems. And, the modern system means that councils do not make rental payments directly to landlords anymore, and some tenants (although definitely not all) take advantage of this by spending the money rather than forwarding it to their landlord.
PDF Estates’ Property Management Services
A lot of landlords have their own preferences when it comes to the demographics they target as tenants. While some prefer the promise of longer term tenancies associated with renting to families, others reap the rewards of riskier student tenants. Each group has their own benefits and pitfalls, and it is possible to profit from any group, if you approach the tenancy properly, conduct thorough checks of any potential tenant, and manage your agreements closely.
At PDF Estates, we offer a number of management solutions to assist landlords. We can source tenants, deal with payments and any arrears, and we also offer a full management service, including 3 months free of charge with no contractual obligations.
Call us today on 020 3815 7952 or email firstname.lastname@example.org to discuss our property management services and to see how we can help you maximise rental yield from your properties, while taking on the landlord burden.