Lettings Market: The Hunt For Yields.
February 3, 2015
Letting agents take note – profits from slicing single houses into multiple flats (known in the industry as houses in multiple occupation or ‘HMOs’) are falling, meaning that this business model is no longer the biggest earner in the buy to let business.
This may have particular significance come May, as the property market expects an influx of landlords looking to invest their pension holdings in the property market.
If you aren’t aware of the upcoming changes to the pensions market click here to find out more.
Although HMOs do still command a decent return (calculated at 9%), profits are falling and they were pipped to the post on the profit league table by landlords buying single blocks of flats or converting buildings or warehouses into apartments.
This investment on a larger scale generated a greater gross profit between October and December 2014, according to figures released by buy-to-let mortgage broker, Mortgages for Business.
The property market may still be buoyant but it is slowing down, especially with the election coming, so those planning to use their savings need to be savvy. Which is where the story gets interesting for letting agents.
Those smaller scale landlords who are still sure that they don’t want the safety that comes with the smaller returns of a fixed savings account and are happy to throw their hat into the property ring, will now be seeking even more guidance and ‘inside information’ from their trusted agent.
Traditionally, smaller scale investors tend to favour investment properties near their own homes as they feel it’s easier to manage something close by. But with the guarantee of rising profit no longer as safe as houses, they’re going to need to look further afield; and may only feel comfortable doing so if they know that there’s a decent agent in the area can ensure their property is managed well.
Potential buy to let landlords should be considering areas within commuter belts, with good transport links that will appeal to young couples, who can’t afford to live where they work.
Securing a property near good schools is always a safe bet, as ambitious parents are likely to pay above the going rental rate if it means they’re in the catchment area for a favoured state primary or secondary. Or they may look to capitalise on the student market.
Either way, all of these strategies adhere to the old property adage: location, location, location. Those savvy savers who are putting that first when it comes to their property search should be poised for the plucking by effective, forward thinking letting agents who proactively market themselves to this new breed of buy to let investors.
By communicating with them effectively (see more here) the right estate agent could be there for their client from the start of their house hunting process right through to the management of their property.
It doesn’t matter whether you fall to the right or the left of the political spectrum – when it comes to election time, that’s the winning strategy.