With rental income shrinking for the first time in a decade, landlords need to consider what their tenants truly value in a property.
Rental income fell by £1.9bn from 2017 to 2018, according to a report from Hamptons International – the first year-on-year decrease since the firm’s records began in 2008.
The fall was most drastic in London, where tenants paid £620m less in rent last year than they did in 2017.
Though the private rental sector has expanded over the past 10 years, it’s important to do everything you can to meet tenants’ needs if you want to stand out in a competitive market.
Read on to find out what tenants are looking for, and how you can do your best to cater to the local demographics.
What are tenants’ top priorities?
Estate agent Knight Frank surveyed 5,000 people renting in the UK to find out what tenants’ highest priorities were when choosing a new home.
Perhaps unsurprisingly, nearly two thirds (61%) of tenants valued affordability above all else when choosing a property to rent. This was followed distantly by its location (23%) and size (10%).
Knight Frank points out that this has been the case with all of their previous tenant surveys, hammering home just how important it is for landlords to price their properties within tenants’ budgets.
There are your own costs to consider, too, so try to find the ‘sweet spot’ where what tenants can afford and what you can afford overlaps.
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How to set your rent
When changing your rent, you should take into account your rental yield – your annual rental income as a percentage of the property’s value.
If you set your rent too low, your profits may not be high enough to pay off your mortgage, especially when maintenance costs and interest payments are taken into account.
But set the rent too high, and your property might stand empty for months, leaving you out-of-pocket after making the mortgage payments.
Whether you’re thinking of raising your rent or setting the rent for a new property, follow these steps to get it right:
- evaluate the local market by comparing similar properties
- ask your lettings agent for a rental assessment
- calculate your rental yield and profit
- check your rental income will pass lenders’ affordability tests
- check what current (or potential) tenants can afford to pay.
What amenities do tenants want?
‘Location, location, location’ has long been seen as the key to finding the perfect property. But for many tenants, it’s what’s inside that counts.
As part of the survey, Knight Frank sorted renters into eight personality types and asked which amenities they would pay more rent for.
The results proved to be highly consistent across all personalities: tenants would rather pay more for in-property features, such as en-suite bathrooms, than for amenities in the surrounding area. In fact, an en-suite bathroom was the top-priority feature for every personality, with weekly cleaning also proving popular.
Dedicated secure parking was frequently chosen as a top-three priority, again regardless of personality, and a local gym was deemed important. But overall, outside factors languished behind indoor features like high-end kitchen appliances, furniture and air conditioning.
Different tenants want different things
While some property features are popular across the board, it’s important to think about the particular type of tenant you want to attract.
Knight Frank’s survey identified nine different tenant groups, each with their own needs and preferences.
|Group||Percentage of tenant population (UK)||Percentage of tenant population (London)|
|Recent or near-graduates in their early 20s||10%||10%|
|Couples aged 25-49||18%||23%|
|Individuals aged 25-49||11%||10%|
|25-49 year-olds sharing with friends||11%||27%|
|Parents aged 35 and under with dependent children||9%||6%|
|Parents over 35 with non-dependent children||17%||10%|
|Long-term renters aged 50-64||8%||6%|
|Long-term single renters aged 50-64||6%||4%|
|Renters in retirement||10%||5%|
Source: Knight Frank Tenant Survey 2019
More than a third of tenants in the UK are 25 to 49-year-old couples and parents in their 30s with older children. In London specifically, there are more 25 to 49-year-old sharers than any other group.
While the survey does not tell you exactly how to appeal to these groups, it’s important to keep in mind what they might want from a home. A large flat with several bedrooms could be perfect for sharers, while a house with plenty of space might suit a family.
It’s important to consider the demographic make-up of your local area. An ideal property for sharers will likely fare far better in London than it will in the countryside.
Across the different tenant groups, retired renters are the most likely to expect that they’ll still be in rented accommodation in three years’ time, with 93% giving this answer. The tenants who least expect to be renting in three years are younger couples, with 50% thinking they will own a home of their own.
On average, across all groups, 69% expect to keep renting. With this in mind, it could be wise to make sure your property is somewhere tenants can settle down for the long term. Keeping the same tenants for several years provides stability for everyone involved, avoiding costly void periods for you and stressful moves for them.