Many lessons have been learnt from the pandemic, and the housing and rental markets have seen some changes that property investors should take note of.
Investing in a property with the highest potential for the future is at the top of most property investors’ priority lists. While some may be in the market for short-term gains and quick profits, property is generally viewed as a long-term asset class that provides lucrative, ongoing returns for those who invest wisely.
In a study from Shawbrook Bank, the intentions and business plans of many buy-to-let landlords seem to have shifted. Some are certainly being driven by trend changes during the pandemic. Those that are willing to place extra focus on what today’s tenants are looking for, as well as shifting future trends, could see the most success down the line.
Property investors eyeing short-term let option
During the pandemic, and certainly once lockdown restrictions started to ease but still limited overseas travel, short-term lets and holiday lets became increasingly popular.
Even after holidays abroad opened up again, huge numbers of people in the UK have opted for a “staycation” this year. As the pandemic rumbles on, this pattern could be set to stay put for a number of years, coupled with the fact that a growing number of environmentally conscious people are trying to fly less.
The report from Shawbrook Bank found that 17% of property investors would look for a property that could double up as a holiday let if needed. Adding diversity to how a rental home can be used means the owner could see fewer void periods, and even draw higher yields when it is used as a short-term let.
Making renting more certain
One of the major differences between owning and renting a property is security. The majority of assured shorthold tenancies are for one year, and this doesn’t offer a lot of certainty for tenants. With more households than ever now renting, though, and an increasing average age of those who do, some landlords may begin to offer longer tenancies to attract more tenants who want to make the rental property their home.
Jackie Tomes, founder and CEO of Tomes Homes, comments: “Security of tenure (i.e. longer rental agreements) has become increasingly attractive to some tenants and this is an area we would like to explore more as a business, potentially alongside commi7tments to fix rent for a longer period of time. We believe that uncertainty on future rent and security of tenure are elements that make the experience of renting worse than owning – so these are areas we would love to start setting the standard for.”
Tenants will pay more to get more
Another important finding of Shawbrook’s research is the fact that property investors can directly influence the attractiveness of their property, and therefore the potential income they could make from it. The majority of tenants surveyed said that if their landlord improved their property, they would pay more.
For a brand new kitchen, around a quarter (24%) said they would be happy to increase their rental payments. A further 20% would pay extra for a new bathroom, while 18% would fork out more each month if the landlord repainted or replaced the windows.
The report adds: “Tenants deemed that a home office would be worth an extra £19 per month and an additional bedroom £22 per month on average. Evidently, landlords can create more value in their properties through a renovation while also ensuring that their properties remain attractive to tenants.”