Rental Valuations - it's a strategy! Find out why less is more...

Your rental valuation strategy should be all about not aiming too high. You don't want to ask for too much monthly rental income. "What?!" I hear you cry. It's true! In this game, less is more. Much more sometimes - possibly several hundred if not a few thousand pounds more over the course of several years. Read on and find out why.

2016 has been a really interesting year so far - and it's only February. But with SDLT changes happening in April we are seeing a flurry of activity and requests for rental valuations of prospective rental properties. Some of these requests are coming from new landlords who are keen to make their first property investment before April. We're also getting a good run of interest from experienced landlords who are reconfiguring their investments and portfolios. Proudhouse Property Management are possibly the leading independent rental specialists in Yeovil and South Somerset. The stats from Zoopla show that for house rentals, Proudhouse is currently 4th with only multiple-office and sales-led businesses taking the top 3 places.

Stats from Zoopla, market share, Feb 2016, Houses, BA20, BA21, DT9 Postcodes

As a dedicated rental specialist it is important to us that we advise our clients fairly, and also correctly manage their expectations. Which is why we're finding it disappointing to engage with a few new landlords whose expectations of rental income have been completely mismanaged - usually because some over-zealous sales agent, or developer, has plucked a sky-high rental figure out of the air as a way of incentivising their buyers. Or sometimes a new landlord has, unfortunately, made some comparisons to other rental properties without factoring in all aspects which has distorted their expectations.

However, there is a big difference between the experienced landlord and the newcomer!  

The experienced landlords all have something in common. They understand one key concept which is really simple: Void periods! (Voids are periods when the property is unoccupied) These landlords will usually say to me, "Chris, I'd rather the house was let than standing empty". Well that sounds like a no-brainer but experienced landlords are willing to drop their price-per-calendar-month expectations - and that is how they secure a better overall income within any given year. Example:

Landlord 1
Has a well presented but average 3 bedroom house which is valued ambitiously at £800pcm. It goes on the market on April 6th 2016. Interest is luke warm as most tenants are looking in the price band £600 - £799. A month later a tenant secures the property, gives one month's notice on their current home, and then moves in at the end of May. This leads to a total of around £8000 paid in the 2016/17 financial year.

Landlord 2
Has an identical house in the same area but has valued it at £725 pcm and it also goes on the market on April 6th 2016. However, this property is valued in the middle of the target price band. It gets lots of interest. Heck, it's even better than some of the more expensive properties. 6 viewings are lined up in the first week and the landlord is spoilt for choice. A couple of the tenants are so keen that they offer to take the property immediately which the landlord agrees to. The house is rented by mid April. The total amount of rent received in the 2016/17 financial year is £8337. That's £337 more than landlord 1!

Now also bear these factors in mind:

1) Many tenancies only last 12 - 18 months so avoiding voids is essential over the years and over the course of several tenancies.

2) Lower asking prices will likely generate more interest and therefore more choice of tenants which in turn means better chances of a good match between tenant and property = happy tenant and happy landlord.

3) Tenants are less likely to leave a property where they think the rent is fair, where they're treated well and with no mandatory renewal fees or other ongoing agency expenses. This means, no void periods caused by needing to re-let.

But my property has a superb, premium, high-end interior? Surely that's worth more?

A great interior - will let your property quicker!

In South Somerset (and unlike a major city area), great interiors with high-end features can command a slightly higher asking price. But only slightly higher. The "going rate" is a powerful market force and the practicalities of space, room size and location are, more often than not, higher up on tenants' lists of priorities than premium fixtures and fittings. However, great interiors can be incorporated into your strategy! A great interior, coupled with an attractive rental value will let your property quicker! Time is money so use your premium property as a mechanism to avoid voids!


Summary
If you're deciding on rental valuation then think "average"! Think "less is more"! Avoid the voids! You will be better off in the long run. Be suspicious of any agent promising gloriously high price-per-calendar-month figures - they're just trying to win your business and are probably setting you up for a disappointment. 

By Chris Chambers
Owner at Proudhouse Property Management

Proudhouse manage properties throughout South Somerset and are are gaining a reputation for excellent customer service through a range of lettings and property services. Proudhouse are dedicated to property rentals and offer a first class personal and professional service. Proudhouse are not a sales office, franchise or part of a corporate chain.