18th April 2015
When searching for a buy-to-let investment, potential landlords have to put their own preferences aside and focus on what their prospective tenants want. Kimberley Reid of Select Property tells you what you should be looking for.
Following the reforms to the pensions system earlier this month, experts forecast that around one in six people aged 55 or over will use some or all of their savings to fund a buy-to-let property investment.
Would-be-investors have been told to concentrate on yields rather than capital growth when it comes to investing in rental property, whilst they’ve been advised to think outside of London and consider cities such as Manchester, where rental rates have grown exponentially in recent years.
But fundamental to any buy-to-let investment is choosing a property that renters will continuously be attracted to, helping to ensure that your asset is frequently tenanted and delivering regular, monthly yields.
So what do tenants in the UK today look for from their ideal rented property?
Research conducted by Savills in 2014 found that 52% of tenants in the UK live within five minutes of their nearest transport links, and 73% within just 10 minutes.
As Britain continues to see higher levels of labour mobility, this need to be close to good transport connections will only continue to intensify. In fact, when asked, 49% of tenants said that being near to work or university is important when looking for a new rental property.
Highly sought after features
Attitudes to home ownership in Britain have changed thanks to the rise of Generation Y, with more people now preferring to rent their property as opposed to owning it. Therefore, tenants are willing to pay extra to live somewhere with certain features.
For example, 28% of renters believe that having more space is important from their next property, with high income households and those with children willing to pay more to have a larger house or apartment. Also, more affluent renters seek an en suite bathroom in every bedroom, whilst 7% of UK tenants favour new build property, with 11% willing to pay a premium for it.
One of the reasons for the increase in tenants in the private rented sector (PRS) is that 30% of more affluent renters are actively seeking a more transient lifestyle. Being constrained by a mortgage can stifle easy movement for those that need it.
But there’s now also a growing need for short- term lets in the PRS. In 2014, there were 47% more self-employed directors and officials in the UK, as more people work in contract based roles. For these people, even 12 month tenancies can prove restrictive. Therefore, there is a clear demand for rental property that caters for the growing number of transient business executives in Britain.
Becoming a landlord and managing a property themselves is something that puts a number of investors off buy-to-let property, further raising the attractiveness of a hands-off, fully managed property.
It is also clear that tenants would prefer to live in a property that is maintained to the kind of high-levels found in fully managed properties. 25% of tenants admit that they moved out of their last rented property due to poor management, citing issues such as finding landlords difficult to communicate with, problems with damp and mould, and poor quality appliances, fixtures and fittings as catalysts for a move.
Select Property Group has published a guide for retirees that might be weighing up the viability of a buy-to-let investment to fund their retirement following the pension reforms. Click here to download Pensions, Buy-to-Let and Planning Your Retirement guide.