Property Management in Putney
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No sooner have we escaped one challenge than we meet another. The pandemic feels like it’s largely behind us, (without counting our chickens…)! Yet now the cost-of-living crisis is starting to radiate outwards and we’re beginning to see the knock-on effects – and they don’t look like they’re going away anytime soon.
As usual, we like to approach things head-on with pure practicality and pragmatism. Far better to look at the issues and have a good plan to manage rising costs, than to put your head in the sand and hope that everything will just work out.
Firstly, let’s take a look back at the last few years to see exactly how this situation came about?
It’s a perfect storm. And one that poses a threat to businesses across the board, including property owners and landlords. But it is also worrying for families, especially low-income households many of whom are tenants, who will struggle to meet the basic cost of living besides monthly rental fees.
It’s worth noting that…
The average monthly cost of renting stood at a record £1,126 in the second quarter of the year, while in Greater London this figure was £2,257.”Forbes Advisor
Not surprisingly the cost-of-living crisis is of deep concern to both landlords and tenants who are affected in different ways. This has created a certain sense of flux and uncertainty in the marketplace.
The story of the rental market continues to be one of high tenant demand but not enough available homes to meet that demand.”Forbes Advisor
Hence, the demand for rental property is still high, but rising costs could easily lead to tenants defaulting on the rent. Hence, if as a landlord you’re planning to increase rent charges, this could potentially put even more pressure on the tenants who are already sinking under the weight of increased fuel and food bills.
Where the rental fee includes fuel costs (as some do), some landlords are now choosing to pass that back to the tenant on new contracts, instead of raising the rental bill.
Meanwhile some tenants are looking to downsize, or are moving into periodic tenancies at the end of the fixed term so that they’re not tied in. This leaves them with more flexibility to move at short notice if things become untenable. Either way, there is evidently a balancing act between the financial needs of the landlord and the financial capacity of the tenant.
So, what can you do as a landlord to protect your position?
Get clear. Look carefully at your income and outgoings so you can see the reality of your current situation, which will very probably have changed since last year. There is no benefit to being in denial. Being frank about your financial situation is the proactive way to manage your business. So, start by getting your spreadsheet up to date!
Taking steps to protect your income and investment is particularly wise right now.
Next, notice any areas for manoeuvre. One example might be that if you have Buy to Let Mortgages and they are on a fixed rate, could you get a better deal? High inflation means that the Bank of England will continue to raise interest rates, so now is the time to negotiate a new fixed rate to avoid your mortgage repayments rising in the future.
Given the cost of energy, it is advisable to check your properties and ensure that they are in a good state of maintenance. If you’re considering upgrades such as new glazing or heating to meet increasing EPC standards, these are priority investments for the future. Better insulation will not only help your tenants to reduce their energy bills, but simultaneously enhance the value of your property.
More than anything, this is the time to communicate with your tenants. How are they doing, are they likely to default on rent, is an increase in rent feasible? At the end of the day good, trustworthy, reliable tenants are an asset and you may find that it is better to negotiate with your ‘quality’ tenant to find a workable solution than to end the tenancy and struggle to find better. Afterall, it costs to find new tenants and an empty property represents zero income.
When looking for new tenants be sure to check references and request a legitimate guarantor where necessary. You’re aiming for low liability in the form of tenants who can sustain a suitable, (and not necessarily the highest), rent for as long a term as possible, or as long as you need.
The current economic situation is likely to last for potentially a year or two… remember the crash of 2008? So, the long game is the strategy here. What do you need to do to remain stable, equitable and preferably moving in the direction of growth? Get it right and you’ll be poised to ride a wave of opportunity on the way to next ensuing boom. We like to think positively!