So you’re a landlord and wondering what falling rents are going to do to impact your investment? Fear not! In this article I am going to be sharing some top tips to help you protect your London rental investment, as well as some of the recent findings when it comes to the best areas to invest.
Rental Figures for London during 2020
During November 2020, rents have declined on average about 5% year on year, and that’s definitely worrisome to lots of landlords. This is a sharp contrast to other areas of the UK, where rents are actually rising and demand actually outstripped supply. Across the country, rents have increased on average 1.72% according to property website Zoopla, as people are looking for more space and properties with definitely outdoor living. So why the disconnect?
There a few factors that are impacting London landlords, and there are definitely some things they can do to prootect their investment & income.
As a landlord myself, especially an international one, I’ve definitely experienced the highs and lows of owning properties as an investment, so I wanted to give you the things that you’re going to need to know and give you some great ideas about how you can make sure you maximise your investment during these challenging times.
For a bit of context, average rents in London are at £1,596 per month, which is a 5.2% decline, compared to where rents were a year ago, which can probably be understandable as we’re still in the middle of a global pandemic.
What has affected the London rental market?
There are three primary factors that have impacted the supply and demand in the rental sector.
Less multinational workers looking to work & rent in London
The first factor that is causing a decline in the rental market is the exodus of office workers and lack of multinational firms sending over staff. Obviously, as travel restrictions are in place, and there’s been an economic slowdown, multinationals and office workers are definitely not flooding to cities as they used to.
Decline in foreign national students in London
Secondly, there’s been a significant decline in the number of foreign national students who are coming to London to attend universities. This is definitely impacting the demand for properties and rental properties in the city, with many student properties remaining empty.
Fewer tourists in London short-let properties
Thirdly, the pandemic has decimated the tourism market and therefore London, as with most cities around the world, are just not experiencing the level of global tourism that they used to have. Therefore those landlords, particularly the ones that used to offer their units as short term rentals, are withdrawing them from the short term rental market and actually putting them on for long term rents.
So, you have had a significant decline on the demand side, from the domestic workers, international staff coming over, a reduced number of foreign national students, and a non-existant international tourist market, compounded by an increase in supply of short-let properties converting to the long term market.
On our team, we’re definitely experiencing falling rents, with pretty much everything we’re renting right now is being listed with rents that are significantly lower to what we were achieving in the past, somewhat in the neighbourhood of 5-10%. These declines have shaved 0.25% off of rental yields earned by many landlords who are relatively quite squeezed in terms of cash flow on their investments in London.
Which areas are doing the best for rental yields in the UK?
While most of London has experienced declines, there are definitely a few notable areas that have seen rents actually increase. These are in Lambeth, which has jumped over 8% so far this year; followed by Ealing & Herrington experiencing increases around 7%; and Greenwich in the range of 5%. So if you are thinking about buying, you might want to look at those areas in terms of having the strongest rental yields in this current market.
By the way, if you want to know more about the best yields in London, check out my previous video on the five top buy to let areas in London.
Top tips for landlords in London
So what can you do as a landlord to rent your property as quickly as possible? I wanted to share my top tips to help you get your property rented in London as quickly as possible, with actionable and implementable ideas that have worked for me and my clients.
Do market research
My first piece of advice is to do your homework! Do market research and homework on what is currently happening in the market and what comparable units are renting at. Use the online portals to compare but dig in as well to see what other amenities might be on offer such as outdoor space, parking, concierge facilities, residence facilities, etc.
Also be mindful of how many other units you’re competing against. For example, if you have a listing in a tall multi-unit property or building you’re definitely going to have to make sure your property stands out and you’re competitive on pricing no matter what you were achieving in the past.
Take emotion out of it
Don’t be emotional about what you were getting in the past. You must be realistic with what it will take to get your property rented in today’s market. Just like when markets are increasing to your favour and rents are increasing, you don’t mind bumping up rents to reflect that, so in today’s market, if rents are declining, you’re definitely going to want to be proactive, get ahead of that, so that you’re not lagging and having undue vacancies that are really going to impact your investment yields.
Don’t forget to put yourself in the mind of your renters, and be very clear-eyed as to what choices they have to look at and what you have to compete against, and consider and make sure that your property is standing out.
Make sure your property is show ready
Speaking of standing out, my number three tip is to make sure that your unit is show ready. Spend money to make necessary improvements – don’t just leave it the way it’s been when the last tenants left. If it needs paint, then paint it, replace carpeting, update the lighting, whatever you need to do. Remember, your property is an investment. It’s a living, breathing entity, and you want to make sure you maintain it and upgraded as needed.
Take great pictures
Number four, especially when it comes to marketing, is to take great pictures. I recently spoke to someone who is struggling to let out his flat, and he never had a problem in the past. I jumped online and I could see that the pictures were inferior quality with beds unmade and it just looked lifeless, in some rooms, you didn’t even have bedding on the beds!
Also, don’t forget about the description. Highlight why someone would actually want to live there, not just the generic statistics about the number of bedrooms and bathrooms. Again, in his case, he mentioned four bedrooms and one bathroom, that screams to me tht these are actually the last thing that people might actually want. So don’t not give people the information, but also don’t scream the worst features in the very first line of your rental description.
Offer your rental property as furnished and unfurnished – if you can
Number five on my list is if you can offer the property as both furnished and unfurnished, this will allow you to cast the net as wide as possible. I know that’s not perhaps typical in other countries, but we do offer properties in some cases as either furnished or unfurnished. For one of my recent clients, we virtually staged an empty flat and put in computer-generated pictures of the flat “furnished”. This enabled us to offer the property as both furnished and unfurnished, this way, if somebody was looking at the property that already had their own furniture, we weren’t necessarily spending unnecessarily for furniture and limit the pool of people who actually might have their own furniture.
However, by computer generating, we could also visually show the level of furniture we would provide if somebody needed a furnished property. Ultimately, we actually did need to furnish it and I did some of the staging so that we were able to deliver the property very similar to the pictures.
By the way, if you want more great staging tips, make sure to check out my recent video on great tips for staging the property!
Be prepared to negotiate
Number six is to be prepared to negotiate. As painful as it is, often the first offer will be your best offer. So don’t sneeze add it or let it go. We had a situation on a flat we were renting out in Notting Hill and the first offer received was considerably below asking price. Well, the landlord didn’t want to accept that, so we went an additional two months and after several price reductions, we ended up pretty close to that first offer, but we had lost two months of rent. So definitely don’t make that mistake – if somebody does put in an offer, make sure you try to work with them and see if you can get them up, and if you have an offer on the table, you definitely don’t want to let it go.
Speak with your current tenants
Number seven on our list is if you do have tenants on an open or periodic tenancy, meaning that they’re past their initial contract period, do your best to keep them or even see if you can get them to extend for another year, even if it means a rental reduction. You want to avoid to have to go out in this current market and compete as much as you can.
I hope this has given you a great sense of what’s happening in the current London rental market, but more importantly, what you can actually do to be proactive and get ahead of it to maximise your investment. If you have any questions about renting out your property or being a landlord, make sure to reach out to me as I’d love to help you answer any questions that you need to have. Also, if you want to get my free guide on the eight common mistakes you want to avoid in letting out your property, then click here.