Defining your target audience is crucial to your rental success
Securing high-quality tenants swiftly is indispensable to maximise the profitability of your buy-to-let property. The ideal tenants are those who consistently pay their rent, maintain the property in pristine condition and refrain from causing any disturbances. Over recent years, many UK residents have opted to rent homes instead of purchasing them, with many choosing to stay in rented accommodations for extended periods without relocating.
Before you begin marketing your rental property, defining your target audience is crucial. This will streamline your tenant search and place you in a favourable position to attract your ideal tenant. Whether your primary concern is the meticulous maintenance of your property or securing a long-term tenant, defining your needs at this stage will help to refine your search.
Consider your prospective relationship with your tenant: who do you envisage dealing with regularly? Each landlord has their own vision of an ideal tenant. Are you seeking someone interested in a long-term lease, or are you content with a quick turnover?
Regardless of your requirements, let’s explore the advantages and disadvantages of various types of tenants.
High-income earning tenants
The income bracket of your potential tenant greatly depends on your property’s type, size and location. For instance, landlords with properties in central London will need to target high-income tenants to meet monthly rent payments. A significant advantage of renting to high-income tenants is the assurance of regular rent payments, reducing the likelihood of chasing missed payments. However, such tenants may demand higher standards for your property.
As a responsible landlord, maintaining your properties as safe and comfortable living spaces is essential. However, catering to this group may require more detailed attention, such as replacing carpets and furnishings more frequently and providing sought-after amenities like high-speed internet and modern security systems.
Low-income earning tenants
If your property is situated in a less expensive area, you may need to target lower-income tenants. Renting to tenants receiving housing benefits comes with its own advantages and disadvantages. One disadvantage includes the payment of rent in arrears rather than in advance. Additionally, the paperwork involved in renting to tenants on housing benefits can be extensive, and administrative processes may be slow.
Another issue is the potential increase in contents insurance premiums when letting to this tenant group. Unfortunately, some landlords hesitate to rent to tenants on housing benefits due to assumptions about property care and missed payments. However, these negative stereotypes are unfounded and reflect a minority of individuals.
On the flip side, there are numerous advantages in renting to this group. Given the scarcity of rental properties available, advertising your property as accepting housing benefits can attract a larger pool of potential tenants. Tenants receiving housing benefits often seek long-term housing, and the Department for Work and Pensions makes regular, guaranteed rental payments.
Family tenants
Renting to families brings with it a wealth of benefits. Chief amongst these is the likelihood of securing long-term tenants, as the upheaval involved in moving home is typically something parents aim to avoid. Research also indicates that renting to families often results in less property management time.
However, it’s not all plain sailing. Children are often synonymous with wear and tear, so your property may suffer more damage. If you’re particularly fond of a specific property in your portfolio, you might want to think twice before renting to large families with young children.
Then again, if you’re letting the property for an extended period, redecorating at the end of the tenancy agreement is probably on the cards anyway. It’s worth noting that families usually seek rental homes with extra space, so be sure to highlight this when attracting tenants. Furthermore, families often prefer unfurnished properties as they tend to have their own furniture.
Tenants with pets
The question of whether children or pets cause more damage to a property continues to be a hot topic. While many landlords refuse to rent to tenants with pets, there could be advantages to welcoming our four-legged friends.
One such advantage is the ability to charge higher rent. Given the scarcity of pet-friendly rental properties, pet owners expect to pay a little extra for the privilege. The additional maintenance justifies this added cost. Should you decide to tread this path, obtaining a previous landlord reference is crucial to flag any past issues.
Young professional tenants
Landlords often prefer young professionals as tenants, and it’s not hard to understand why. This demographic is known for its independence and financial stability, making it a desirable choice for landlords. Let’s delve into the specifics.
Despite their youth, this group tends to be more respectful of their living spaces than students. They’re less likely to host raucous parties, which reduces wear and tear on your property. Furthermore, their life experience equips them to handle minor issues independently, saving you from unnecessary hassle.
Choosing to rent out a House in Multiple Occupation (HMO) property can yield significant returns. This is especially true if your tenants are professional couples. With two incomes, they are often more stable and reliable when it comes to meeting rental obligations. However, it’s worth noting that young professionals, much like high-income tenants, have certain expectations. They generally seek modern conveniences and a high standard of living. To attract this group, you should offer amenities such as a dishwasher, high-speed internet and contemporary furnishings.
Renting out an HMO property comes with additional responsibilities and paperwork. It’s also important to consider the potential for conflicts between tenants. Additionally, young professionals tend to change jobs frequently, which could lead to early termination of tenancies.
Student tenants
Despite the somewhat tarnished reputation of students when it comes to maintaining rental properties, the student rental market is teeming with opportunities, especially in university towns. If your property is located in a university town, finding tenants won’t be a problem.
Students are typically less fussy regarding appliances and furnishings, making older properties with basic furnishings an easy let. No state-of-the-art appliances are required as long as your property is safe, comfortable and compliant with health and safety obligations. Plus, renting per room often yields higher returns!
However, there are considerations to keep in mind. Maintenance and repairs may be more frequent due to the larger number of individuals living in student properties. And remember, students like to socialise! Be prepared to address neighbour complaints. Since this will likely be their first time living away from home, you’ll need a guarantor instead of a credit check. Also, competition in the student rental market is growing, so do your homework before committing.
Looking for a mortgage to help your property investment?
Whether you’re starting out or expanding your property portfolio, we’ll help you find the right buy-to-let mortgage for your needs. To find out more or to discuss your options, contact the team.
Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Please also note: this is a long term investment which you hope will generate rental income along the way and a profit when you sell the property, but bear in mind that if you need access to some cash, a property can take time to sell or remortgage. If house prices fall, you might not be able to sell for as much as you had hoped. You would have to make up the difference if the property sold for less than you owe – a risk that increases, the higher the percentage you borrow. If you sell for a profit, you may have to pay capital gains tax. Don’t forget that with a variable rate mortgage, your costs will rise if interest rates go up. This would eat into, or even wipe out, your income and profit. It is recommended that you also maintain access to emergency funds to cover your mortgage payments during ‘void periods’ that may arise whilst you have no tenant and the property is not let.
