Adjust to Tenants Calling the Shots
By Kirsty McLuckie, Scotsman
One effect of the property market downturn is a rise in supply of flats to rent. Tenants, both in Glasgow and Edinburgh, now have a huge choice in some areas and landlords are being urged to upgrade their properties if they are to attract tenants.
Cullen Property have seen their refurbishment service gain in popularity recently, which they put down to more rental properties on the market than at any other time over the past five years. Operations Director Steve Coyle says: "Landlords have to compete for tenants if they want to avoid flats lying empty."
He pinpoints two-bedroom flats as a type that are plentiful on the market and he says many of the owners of these properties are first-time landlords without a great deal of capital to upgrade. "We see plenty of couples who have moved in together and want to rent out one of their properties but if they aren't prepared to replace tired decor and ageing fittings, they are likely to lose out to better flats".
He says that owners should learn from the professional landlords who tend to own larger properties, for a longer timespan. "Most of the owners of our HMO flats, with three, four and five bedrooms, know that spending £10,000 upgrading them every few years is a long term-good investment."
And while some cash-strapped amateur landlords may find it difficult to raise money for refurbishment on their investment, he says cutting corners will only cost them money in the long run. "New landlords tend to underestimate the importance of a property's quality, but offering a high standard of accommodation massively increases their chances of finding a reliable long-term tenant."
But Stuart Montgomery, of BEN Property in the city, believes even if you have an empty property which is a little tired, you do have options other than spending thousands on it to attract new tenants. He would always advise clients to refurbish if they can, but a short-term solution is to cut the rental price, so that you are offering better value for money against similar properties. "Being realistic on the price and offering a good deal, especially to a sitting tenant, will put off having to spend a large amount of money on a flat in the short term." But he says that many landlords, especially those who have had a sitting tenant paying a higher price for the last few years, do not want to spend money on the property before letting it again, nor do they want to drop the rent.
"They are very resistant, but when they consider the costs of paying for an empty flat, with not only mortgage payments, but council tax and utility bills too, taking a cut in the rental price is often preferable."
Steve Coyle doesn't think the tactic works, however: "If tenants are looking to spend £670 on a two-bedroom flat, they will take the best one they can find. They are unlikely to settle for one with a 15-year-old kitchen because it is only £600."
He believes the need for investment will eventually put many amateur landlords out of the market altogether. "You have to be used to re-investing in your portfolio, which people who have owned flats for 15 or 20 years understand. Added competition for tenants, plus increased legislation, will put some landlords off, but will also greatly increase the quality of rental stock and that is no bad thing."