Those landlords investing in more properties are making calculated decisions to help mitigate any risk. It makes sense if one tenant can’t pay rent, having multiple properties where tenants are paying will help mitigate the loss. This is also the case for investing in houses in multiple occupancy (HMO). The yields are noticeably higher than on single-family accommodation. There are also typically fewer or smaller void periods as if only one room is vacant in a shared house, then the landlord still receives income from the remainder. Many landlords are asking tenants, particularly students, to pay several months in advance, while some landlords also make tenants joint and severally liable so that risk is reduced.
Property is essential, and despite the recession and unemployment rising, the rental market in the UK remains incredibly robust, in fact, Rightmove recently reported that the demand for rental property increased by 20% when compared to the equivalent months in 2019. With a lack of higher loan to value mortgages favoured by first-time buyers, more people are renting as they struggle to afford the 10-15% deposit required to buy a home. There is also evidence of a rise in divorces adding to the demand for rental as well as older children who prefer to be in lockdown with friends rather than with their parents. Once the UK returns to a more stable economic platform, the trend of rising rents should continue making buy-to-let property a sensible medium to long-term investment.
Landlords looking to invest should consider some interesting recent trends in the rental market. After initial fears to the contrary, the number of university students actually increased in 2020, making HMOs in university towns and cities an attractive investment. There has also been a trend towards more social living, particularly with younger tenants in cities who are preferring to live in shared houses with friends.
Rural areas are seeing larger increases in average rent than urban areas as those who can work remotely have less need to live near the office. This shift might revert in the months following the pandemic as employees return to offices. However, there are predictions that remote working is here to stay, to some extent at least. Therefore, in the next year, the requirement of good commuting links might be replaced by the desire for outside space or an extra bedroom to be used as an office.
When considering the past year, a quote from Albert Einstein comes to mind. “In the midst of every crisis, lies great opportunity.” While the year has certainly been a difficult one for many, the past few months have presented opportunities in the rental sector. Once the UK returns to a more stable economic platform, the trend of the average rent increasing should continue making buy-to-let property a sensible medium to long-term investment.
