When looking to rent a property out, every landlord is always keen to get the best tenants who will look after their property well during their tenancy for the best price – it’s a no brainer! But it’s also worth looking at the long-term plans for the property and how to improve your rental income from it. The process obviously needs to work for you in order for it to be profitable and beneficial. The best way to ensure the rental process is in your best interests is to minimise the void periods and the frequency of new tenancies for the property. It is absolutely no surprise that we see the same residential properties coming available every year (leaving these landlords a little frustrated that they are outlaying time and money on re-letting) whilst many other properties stay tenanted for years and years (with very happy landlords who can rest assured their properties are largely ticking along without much need to interfere).
Here we explore how getting the biggest bang for your buck may not always be the best business tactic, and why it may instead be more beneficial to take a more holistic, personal and considered approach to pricing and other decisions that will affect your likelihood of finding brilliant, long-term tenants.
Between a previous tenancy ending and a new tenancy starting, there will inevitably be some expenses in order to get the property ready for tenants to move in, and also to ensure that you have the best possible protection for potential damages. These expenses may include, but are not limited to:
- redecoration
- replacing older furniture or appliances that have seen wear and tear
- professional cleaning
- garden cut-back
- a new inventory and schedule of condition
- changing locks for added security
- deposit protection
- letting fees
And let’s not forget that in order to carry out all of the above, the property will need to be empty – which not only means that there is no rental income but there are also utilities to cover including council tax, gas, electricity and water. It’s easy to see how that first month’s rent for the new tenancy can quickly slip away on these essential costs.
Most tenancies will initially be for a fixed term of 6 or 12 months, which generally works well to provide a good period of security for tenants and landlord whilst the tenants decide whether they are likely to want to stay for a further period or leave at the end of this fixed term. This will depend on a plethora of factors, including their personal circumstances and how much they are enjoying living in the property.
If your tenants are likely to only stay for a 6- or 12-month tenancy rather than extending any further, it will soon be time to re-market the property and search for new tenants. Setting up that new tenancy will come with the above expenses again. It’s easy to see how this rinse-repeat cycle of short-term tenants not renewing their tenancies can make it stressful to make your rental properties a profitable – not to mention enjoyable – business venture.
How can we resolve this? Whilst it’s never going to be a one-size-fits-all solution, there are definitely pointers that can help encourage tenants to stay in a property for longer.
- Price the property correctly.
Whilst we will always advise on how the market is acting from our perspective and using our detailed tools, it is ultimately a landlord’s choice on price. If the property is priced correctly for the current market, is well presented and well marketed, you should have no trouble finding tenants. If, however, you are chasing the absolute top rent, it will likely cut out a huge portion of potential tenants and will therefore limit your pool of applicants. This in turn may mean it takes longer to find a suitable tenant, leaving the property vacant for longer. Although you may get that extra £25 a month you were after eventually, you may literally have also just cost yourself the entire profit you’ve made from that extra £25 monthly by subsequently extending the void period by a couple of weeks.
Charging the absolute highest possible price for your property type also often gives the tenant the expectation that the property will be exceptional, and anything less than perfect just will not do. And rightly so! If you’re paying top dollar, you should get the top product. However, very few properties are perfect, brand new throughout, and completely faultless. Price the property appropriately and you will get a much more appropriate response from applicants with realistic expectations. If your tenants are paying way above average rent for their property but are experiencing problems with maintenance, furnishings, upkeep etc., there’s a fair chance they will start looking elsewhere when we ask if they’re interested in renewing their tenancy. If they believe they could potentially get more for their money or get the same sort of property for lower rent elsewhere, they will likely start looking to move.
- Listen to your tenants and their requests.
Now more than ever, we are getting regular requests from tenants asking if they can make changes to their agreement or the property. These have ranged from painting a room to accommodate a surprise lockdown baby, to installing wall-mounted desks and shelving to improve working from home facilities to allowing a pet cat to help with loneliness during lockdowns. It probably goes without saying that agreeing to reasonable requests like this makes it far more likely that your tenants will remain in that property long-term as it will feel more homely and suitable for their changing needs.
This past year we have also seen many tenants in an unprecedented financial situation when they have needed to change jobs. Simply taking the time to listen to your tenants’ circumstances and genuinely working out if you are able to defer their rent payment one month, or change their rent due date, might just mean that they feel far more valued and secure in their home. Whilst this has been a difficult time for everyone, no small act of kindness has gone unnoticed.
- Keep up with maintenance and respond promptly.
It’s nobody’s favourite topic, but it plays a huge part in tenants’ happiness in their property, and therefore their likelihood of staying for longer. Our maintenance manager has a huge task in keeping track of every maintenance issue and chasing responses from contractors, landlords and tenants. Responding promptly and trusting professional opinions will keep the machine running efficiently. This is also a further example of how chasing the lowest possible priced quote for a job may cause a delay that, in turn, causes a larger issue costing more to fix, and some justifiably unhappy tenants.
Keeping on top of minor maintenance will prevent small issues from becoming mammoth tasks that may put your tenants off remaining in the property. Replacing a wobbly chair makes a far better impression than waiting for the chair to collapse when being used.
- Offer the best option you can for their circumstances.
Your tenants may already have plans for the near future, such as moving elsewhere, moving in with a partner, or growing their family. Or equally, you may have plans for the property on a certain date, such as moving back in yourself, selling it, or renting it to a friend or family member. Why not discuss all potential options for the tenancy with your tenants to see if there is a plan that can mutually benefit them and you? For example, suggest renewing for a fixed term of 9 months rather than 12 if they already have a date that they will be relocating; or offer a fixed term renewal of 2 years if they are anxious about security of tenure when a baby arrives; or offer a monthly rolling tenancy if they are unsure about their plans for the immediate future, which gives them the freedom to end their tenancy if their circumstances change. You may just have pushed back when you need to re-market (and pay the above listed costs) by a decent period, and your tenants will undoubtedly be really grateful for your understanding. Win-win!
- Weigh up the benefits of increasing rent for a renewal.
It’s no secret that rents in high-demand areas, such as Brighton, generally tend to increase year-on-year. Whilst you have the right to increase your tenants’ rent at certain intervals during their tenancy (such as for a renewal), this doesn’t mean it’s always the best course of action. Your tenants might be at the top of their budget with the current rent price, or may have started researching what else they could get for their money, or may even have been discussing moving in with a partner – so any suggestion of an increase may give them reason to start searching for other properties.
We cannot stress enough that market rents for new lets are not directly comparable to the appropriate rent for a renewal – that similar property a few doors down that you’ve found online for £100 more per month is not necessarily an indication that your current tenants should be paying that price for their renewal. If your tenants have looked after your property well and abided by their tenancy agreement, and you’d like to keep them for as long as possible, we would always recommend keeping the rent the same for as long as possible.
We are huge advocates of providing long-term homes for tenants and ensuring that everyone is as content as possible within their tenancies. By adopting the approaches we have outlined above, we hope to give our tenants and landlords the best chance at forging long and happy tenancies. These tenancies are worth their weight in gold and will not only keep landlords’ profits consistent and predictable but will minimise the stress, costs and work involved in regularly re-letting overpriced properties.
Hopefully, this has proved useful and planted some seeds for when your next property comes vacant, or your tenants look to renew their tenancy. If you need any advice, we’re always here to help!