Research data published by the 2018-19 English Housing Survey has revealed that tenant demographics are changing. Many landlords assume that the vast majority of tenants fall in the under 30 age group, as these are the people who can’t afford to buy. However, the stats indicate that there has been a sharp rise in the number of older tenants.
The number of tenants aged 55-64 now accounts for 10% of the private rental population in the UK. This is in line with a fall in the number of owner-occupiers in that age group. The number of families with children living in private rental accommodation is also rising, and 37% of tenants now fall into that category. There has also been an increase in the number of social tenants.
What can Landlords Learn From This Data?
As a landlord, it’s very important not to make assumptions about your tenants. If you don’t do any research before you invest in a property, you could end up with significant void periods. Naturally, no landlord wants their property sitting empty for months at a time!
Do some research before you invest. Speak to local letting agents to see what types of tenants are on their books. Once you have a target tenant in mind, you can find the most appropriate property for them. The more prospective tenants you have, the more consistent your rental yields will be.
Here’s a rundown of the main tenant types.
Young 20-somethings are the type of tenant many landlords envision when they start looking at investment properties. This is perfectly understandable. After all, most 20-somethings can’t afford to buy a home and many of them want their independence, so a flat-share or small bedsit is the obvious choice of abode.
The disadvantage of letting to young people is that they are rarely long-term tenants. They either couple up or find a better job, which usually involves an upgrade in their living accommodation. Nevertheless, if HMOs are your target, consider marketing to younger tenants. These should be furnished with beds, wardrobes, etc., and white goods.
Look for properties in cheaper areas. Most young people are either in minimum wage jobs or claiming benefits while they look for work. They don’t expect luxury, but easy access to public transport and local amenities is a good selling point.
Students are a specific sub-set of the young people category. They are also short-term tenants but unlike non-students, there is some degree of continuity when you let to students. For this reason, many landlords see students as a good investment. Yes, there is a lot of work involved when you manage student properties, but void periods are few and rents are often paid many months in advance.
If you want to target student tenants, consider investing in HMOs in popular university towns such as Nottingham and Manchester. Look for areas where property prices are low and rental demand is high. Students prefer living in close proximity to university campuses, bars, and food outlets. You’ll find that student housing tends to all be in the same areas, so find out where these are before you start looking for properties.
Students expect furnished properties, so budget for providing basic furniture such as beds and sofas.
Young Professional Tenants
Young professionals are an attractive proposition. They have more money to spend than their minimum wage peers, so expect a slightly better class of housing. Many young professionals would rather spend their disposable income on their social life, so choose to live in shared housing to save money. But there is a sub-set of young graduates in well-paid jobs who are willing to pay more for a better-quality home.
If you are targeting this demographic, consider investing in upmarket apartments in city-centre locations. Properties with extra amenities such as on-site gyms, 24-hour security, and attractive communal areas will appeal to this type of renter. They will expect good quality white goods, nice décor, and fast broadband as standard.
Single Parent Tenants
Single parents attract a lot of bad press, but they do offer a lot of advantages. For starters, most single parents want a long-term home so their kids can settle in at school without the fear of being uprooted every year. Some single parents are also on benefits, so the rent is guaranteed if the housing benefit component is paid directly to the landlord.
Properties may suffer more wear and tear when children live there, but the same is true of other tenant types, such as students or tenants with social issues, such as drug and alcohol dependencies. If you do decide to target this sector, look for two or three-bed properties in cheaper areas. Properties within walking distance of schools are a good buy, as are properties with gardens.
Consider providing basic furniture, such as beds, a sofa, and white goods. Many single parents are on a low income and can’t afford to furnish a home.
Renting to Families
Families run the gamut of low-income families seeking a long-term home through to affluent families looking for short-term rental housing while a property transaction goes through or one partner is relocated for work.
Decide which sort of family you are targeting before you invest in a property. Low-income families will want cheaper two, three, or four-bed properties near schools and other local amenities. Mid- to high-income families are more likely to be interested in larger family homes in sought-after residential areas within popular school catchment areas.
Remember, if you want to appeal to high-earning executive families, the property needs to match their aspirations. Modern properties tend to be a better investment, as they are more energy-efficient and are usually located in upmarket housing developments out of town, in the commuter belt full of pretty villages.
Families at the lower end of the earnings scale are usually looking for long-term lets. This is an advantage, as void periods are minimised. Depending on the type of family you are targeting, it can sometimes be worth furnishing the property.
Older renters are often in the private rental sector because they have fallen on hard times for one reason or another. There is also a sub-set of older tenants who have long-standing mental health and other social issues.
The advantage of targeting older tenants is that they mostly want a long-term home. They are also more likely to look after their properties, such as carrying out routine maintenance and taking care of the garden.
If you want to target older tenants, look for inexpensive properties close to public transport and other amenities. Bungalows and ground floor flats are a good choice, as many older people have mobility issues and can’t manage stairs.
Older tenants will usually have their own furniture, so unfurnished properties are more attractive to them.
Social tenants are tenants claiming benefits. Sometimes, this is temporary, but many social tenants have long-term issues with drugs and alcohol dependencies, and/or mental health issues.
This type of tenant is very challenging to manage, but if you are a full-time, professional landlord, you may find running HMOs a profitable venture. If you get a good mix of tenants who can live together without any issues, things will run smoothly, but all it takes is one or two disruptive tenants with anti-social behavioural tendencies and you have a problem on your hands.
If you want to target social tenants, look for an HMO or a larger property that can be converted into self-contained flats or bedsits. Screen tenants carefully and be prepared for extra red tape and management issues.
Targeting Long-term Tenants
Stats from the latest English Housing Survey show that tenants are increasingly staying in the private rental sector for more than four years. The average tenancy is now 4.4 years and 28% of tenants had rented a home for more than a decade. This clearly shows that tenants are now less likely to see a rental home as a short-term fix, which is good news for professional landlords.
There are many advantages to targeting long-term tenants. Fewer voids and less day-to-day management being two big pluses. If this appeals to you, consider investing in properties that will appeal to families and older tenants.
Before you buy, build a picture of the type of tenant you want to target and look for a property that is most likely to appeal to them. If in doubt, speak to letting agents and find out what the local rental market is like. The more research you do, the better. After all, buy in haste, repent at leisure!
What type of tenant lets your properties? Tell us more below or reach out on social media. We’d love to hear from you!
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