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Advice for buy to let investors in London



Tenant marketing:
 
 - Rental pricing
 - Photography
 - Advertising placement
 - Viewings
 - Property plans

Rental pricing

Buy2LetExpert recognise pricing the rent is a balance. Too high and there will be fewer or no viewings, too low and there will be too many enquiries. So as an example three bedroom property with a rent of £360 per week might attract a good number of viewing from single (recently graduated) working applicants. Raising the rent to £390 per week at the same property will start to attract more potential occupants for the same property as well as less potential enquiries. A typical viewing at the same property might be two couples for two of the bedrooms and a single person for the third bedroom. In this example raising the rent £30 per week means five tenants rather than three. There are a number of reason why Buy2LetExpert would take the lower rent:

  • Increased wear and tear. Five people at a property (versus three) clearly impacts on appliances such as washing machines which receive almost twice as much use. Redecoration intervals, replacement carpet frequency, general repairs and much more also increase. Against this the rent has increased by £1560 per annum. However, some of this will be swallowed up with the increased wear and tear costs.
     
  • Increased Voids. The more people who live at a property, the more chance one or more of these tenants will wish to move out. There is more chance for example of a job locality change, unemployment, decision to move in with girl(boy) friend, etc etc. These life changes are quite normal but almost 70% more likely in our example of five tenants versus three. One tenant moving out may be replaced. However, such a replacement must be approved and referenced by Buy2LetExpert and a new contract formed meaning a new inventory and deposit registration. This whole process costs money. It may be that the tenants wish not to renew at the end of the tenancy rather than find new tenants. Finding new tenants, advertising and more costs money and time even if there is no void. A one week void in our example costs £360 further cutting into the £1560 gained from the higher rent. At the re let, “holding out” for the extra £30 per week costs £360 per week...or put another way, it takes 12 weeks to recover the one week void!
     
  • Legal Issues. Legislation regarding Houses of Multiple Occupation (HMO) has been changing in recent years and continues to do so. The area is quite complex but broadly a property with two or more stories with more than four unrelated occupants require to be registered as an HMO.

The Main Market

In short, do not be greedy. Good tenants are best in the long term even if they pay a little less. In the main market there is usually quite a tight range of pricing for a similar target market. So, if the target is a single employed graduate the rental price for a 3 double bed apartment close to transport in Balham, London is say between £320 and £380 per week. But2LetExpert would suggest presenting the property to its maximum potential... and better than the competition, marketing it well and then charging at or slightly below the market price potential (say £360 per week). It is important that the tenant feels they have good value for money and they could not have got the same elsewhere. This strategy will ensure a good quantity of quality viewings which is essential when targeting reduced tenant turnover, low voids and caring civilised tenants who pay rent on time.

The Premium London Market

Pricing in the high end premium London market is a little different. Such properties have a very small target market of high net worth individuals. Many applicants will be from overseas, possibly working in London for a couple of years. Rental prices may be affected by currency rates, bonus levels and other drivers that have no impact on the main market.

In this market, again, pricing should be researched carefully via property portals etc. However, one difference with the main market is that property is presented with a 'target price'. Potential clients would then be expected to make an offer and negotiation could continue. Advertising in this market might result in two or fewer viewings a week but all viewing are likely to be serious and are likely to result in repeat viewings. Compare this with the main market where you might expect several viewings a day and tenants competing. Certainly no 'rent offers.'

Finally, in the premium market, where rents can exceed £2000 per week, the costs of voids are enormous. Hence a two year contract versus a one year is always preferable even if the rent is a bit lower. Longer contracts should consider inclusion of inflation (CPI) clauses on rental prices beyond the first year. Buy2LetExpert can advise in more detail but suffice to say the premium rental market has a few aspects that are slightly different from the main market.

 

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Row of buy-to-let type proeprties

 

 

 

 

 

To contact us call: 020 7482 0300 or email