High rental figures clouding business objectives

As predicted, the rental market has got off to a flying start in 2011 with Townends Estate Agents, part of the Badger Holdings Group, reporting 10% uplift in demand compared to January 2010, and a 40% increase on January 2009.

However, Caroline Kavanagh, Group Lettings Director of Badger Holdings, warns that in order to sustain a profitable income, more landlords need to treat their properties as a business and not simply be lured to the market by the promise of high rental income.

Many buy-to-let landlords are currently benefiting from record rents, high demand, shrinking void periods, and for some, very low interest rates on their mortgages.

Caroline Kavanagh comments:

“The magnet of higher rents, increasing return on investment and reports of relaxed buy-to-let lending, makes such an investment seem ever more appealing to current and prospective landlords. 

"However, entering into, or sustaining a portfolio in this market is not just about owning and renting out a property, but should be seen as a business, which takes investment of time, money and sensible decisions in order to run and maintain a profitable service.”

Although the need for more stock is apparent in order to feed demand, Caroline advises that smart landlords do what prudent business people do, and review their rental properties with a view to maintaining their competitive edge and avoiding periods of down time.

“This may mean considering offers slightly below what could be achieved by holding out, or only increasing rent on an existing tenancy by a fraction, but this approach is more likely to lead to securing a longer term tenancy which, when weighed up against even a two week void period, can outweigh the desire to hold out for the highest rent.

"By example, a landlord who is willing to take £50 less per month on a £1500pcm is looking at forfeiting a total of £600 over a year.  Conversely, a two week void period on the same property would equate to almost £700.”

Therefore, Caroline believes those landlords that are holding out and pushing to achieve maximum rental income should realise that despite strong demand, tenants’ expectations remain high and whilst it is possible to ‘get lucky’, it is less sustainable, as tenants will look for a better offer leading to the possibility of costly void periods further down the line.
 
Caroline adds:

“landlords should also review the facilities they are providing by taking the time to carry out regular maintenance works between tenancies.  This not only helps to attract the best calibre of tenant as fast as possible, but encourages tenants to maintain such high standards for the life of the tenancy.”