Tenants are vital to the well-being of the private rented sector (PRS), but to what extent does the type and character of tenants matter to  landlords and property investors?

Are long-term renters always preferred or do some sectors within the PRS seek a higher churn rate, with tenants changing every couple of years, and if so, why?

With the recent pressure on the PRS due to the lack of available properties and great interest everytime a property becomes available for rent, it might be easy to assume that landlords don’t need to give much thought to who lives in their properties.

As buy-to-let professionals, we’re going to look at who is the best tenant for your property and why they really do matter.

The ‘traditional’ view

We’ve put ‘traditional’ in parentheses because while it’s true that this view of tenants is still prevalent, it isn’t the only one.

In this instance, the ideal tenant for your property is one who is looking for a long-term home, who is open to communication with the landlord or their agent, is financially secure and responsible.

In short – they look after their home, and therefore your investment.

This is still the gold-standard when looking for tenants, as landlords tend to favour both regular income and longer-term capital growth.

Tenants can only help with one of those, however responsible long-term tenants  reduce management costs for landlords by minimising rent arrears, advertising costs to find new tenants and minimise void periods.

If you do an online search to find out what landlords want from tenants, this is what you’ll find. This response from The Independent Landlord is typical.

This view was echoed by Charlie Innes of Glenham Property, who in response to our query offered the following observation:

“Most investors I work with tend not to be overly specific in terms of tenant demographic. We rather focus on areas that offer strong rental demand and opportunity for long term capital uplift.

These tend to be locations that would attract young professionals. There is a more niche type of investor who is more specific and targets the student market buying HMO properties in areas that offer easy access to further education campuses.”

It’s not just about money

While regular and reliable rent is an important factor for landlords, it’s not the only consideration when seeking tenants for your property.

The article by the Independent Landlord mentioned above makes several points about prospective tenants, one of which is that they should ideally be good neighbours.

This term covers quite a lot of ground, and is important, especially if the landlord is to have a quiet as well as profitable life.

Jack Gallagher of Western Lettings is a man with considerable experience in this field. He confirmed that for most landlords, regular rent payments were crucial.

However he went on to expand upon the qualities that his landlords looked for in potential tenants:

“Many of our landlords are looking for tenants who will be acceptable to their neighbours.”

“They may be renting their current or previous home and have long-established relationships with their neighbours. For them, introducing tenants who might disrupt that relationship is not something they’ll countenance.”

He went on to raise another quality, while accepting that it was difficult to determine whether the tenant had it or not – responsiveness. “Some tenants simply won’t report issues in the property until they directly affect them.”

“This could be minor matters, but it might include the collapse of part of the ceiling, or the subsidence of a bathtub in the bathroom. These are problems which are always best resolved early, but some tenants seem to think it’s not their problem.”

So responsible tenants, who are willing to invest in not just the state of the property but also in the wider neighbourhood are to be preferred.

Landlords are often accused of being interested in the finances of letting above all else, and let’s be honest, buy-to-let is an investment so the money matters, but responsible tenants can make your life infinitely easier and more pleasant.

Short-term Tenants

Short-term-lets have become increasingly popular, although there are signs, globally, that their popularity may have peaked as various authorities have started to restrict the number of STLs in their areas.

The big advantage as far as landlords are concerned is higher rents. People visiting a city for a week or so will pay far more for accommodation than tenants looking for a long-term home.

Indeed, to refer to those renting these properties as tenants is stretching the description, and many are of the opinion that ‘guests’ is more appropriate.

Sadly, for landlords, this means that such tenants have no investment in either the property or the neighbourhood and there are endless anecdotal tales of problems arising from such tenants.

None of this is to say that seeking this kind of tenant is wrong, but the rapid growth of AirBnB-style lets caught local authorities by surprise and for a period the sector was poorly regulated, using laws designed for more traditional rentals.

This is now changing worldwide and while there will always be a place for such tenants, we are going to see a more rigorously regulated sector which will make it less attractive to some landlords.

Consequently we will, and have, seen some landlords exit this sector or revert to longer-term lets.

Embrace the churn

Although a minority, some landlords actively seek tenants who are not looking for long-term lets. This approach may be driven by a market when rents are rising rapidly, and landlords want to capitalise on this.

A higher churn rate means the property can be regularly refreshed and offered at an improved rent which reflects the current market value, something which is harder to do when tenants are in for the long-haul.

Alternatively, this approach allows landlords to invest further in their properties, maybe with extensive refurbishment, or to better manage rapidly fluctuating mortgage rates.

As we said, this is a less-common approach and makes less financial sense during periods when rents are largely stable across the sector.

Advice from the property pros

The majority of landlords are looking for tenants for their properties who pay their rent regularly and are, in the words of Jack Gallagher, “acceptable to the neighbours”.

The quality of your tenants is key to a successful property investment journey.

The best tenants will respect your property, fulfil their obligations and not cause unnecessary problems. In short; they will help you with your investment and the return on it you hope to see.

It’s no accident that many who have worked in the PRS for years emphasise the importance of looking after your tenants to ensure your own success. Done properly, being a successful landlord is all about creating a mutually beneficial relationship.

In summary…

Tenants’ ability to pay their rent regularly and on time are important – there is no point in pretending otherwise. However landlords hoping to profit from their investment will look for more.

If you wish, you can view the relationship between landlord and tenants as a business partnership. They need you to provide them with a home, you need them to care for your investment and to generate a return.

As a landlord, ensuring that your tenants’ life is as comfortable as possible will go a long way to making your role straightforward and rewarding.

If you would like to discuss this or any other aspect of buy-to-let investment, call us or drop us a line. We’re always happy to put our knowledge and experience at your service and help you find the best investment for you.

Thank you for reading and we hope we can be of further help in your property investment journey!

Written by Chris Wood, MD & Founder of Portolio

Get in touch on 07812 164 842 or email [email protected]