Students aren’t typical renters

How not to worry about the type of tenant your property will attract

We often meet with people who are considering property investment but have some real concerns about the prospects of life as a buy-to-let property investor. One of the most common fears about owning an investment property that we hear from beginner property investors is that “my investment property will get trashed by student renters or youngsters that don’t care because it’s not their property”.

While students and young people certainly make up a large proportion of the private rental sector, you might be surprised to hear just how many tenants are aged 46 and over.

In this article I’m going to look at the current rental market and how it’s likely to develop over the next few years. You’ll also learn some property-specific factors that both millennials and ‘silver renters’ (as older tenants are now called) look for, which you can use when deciding on your property investment strategy.

The private sector rented market is big and growing

Property investment research by PwC is very bullish for property investment and the buy-to-let market. They forecast that by 2025 there will be more renters than mortgagees. They expect the number of homeowners with a mortgage to fall to around 7 million by 2025 (from more than 10 million in 2001), while the number of rented households will rise to around 7.2 million.

PwC expects more than half of 20 to 39-year-olds to be renting privately by 2025. Many of these will be students. An equal number is likely to be young professionals, probably graduates at the beginning of their careers and possibly saving for a deposit to buy their own home.

However, older renters are already dominant in the private rented sector and will continue to be so. In separate research, Your Move has found that almost half of all renters are of the silver-haired variety, and less than four in ten are under 35 years old.

For owners of buy-to-let investment property, here are two elements of the Your Move research that you’ll find important:

  • 80% of young renters want to own their own home
  • Less than one in five renters over the age of 55 want to own their own home

That statistic tells me that if you get a tenant aged 55 or older, you’re more likely to have a tenant for life.

Why has the private rented sector exploded?

There are a number of reasons why the rented sector has ballooned in recent years, and while some of these are specific to the age of renters, others cut across all demographics:

  • Affordability is an issue that affects all. Mortgage costs are within reach of many wages – especially with interest rates at all-time lows – but deposits are hard to cover. The days of 100% mortgages are gone. House prices are up strongly. Whether you’re buying a home or an investment property, you need a big deposit. Younger and older home buyers are finding it harder to save for a deposit.
  • Lifestyle issues. Several lifestyle issues affect where and what type of property renters want. In terms of the desire to rent rather than buy, younger renters are more likely to want to remain flexible for changing life and work. Older renters are probably happier to stay in a single location for longer.
  • Repossessions affected plenty of previous homeowners during the Global Financial Crisis. Many older people don’t want to go through the experience again. For them, there are many benefits of renting, not least of which the knowledge that if the economy crashes again and they lose their job, they will be able to claim housing benefit to help pay their rent – there’s no such support for mortgages.
  • Divorce often leads to the sale of the family home. Divorced parents and children often begin living in rented accommodation. It is mainly an issue for older renters. The equity in many divorced couples’ homes is not enough to pay the deposit on two houses. Meaning at least one rental property is needed in a family split.

On top of these issues, the marketplace itself has changed. Local authorities have moved away from property investment, instead of selling millions of council houses without replacing them over the last three decades. As the market has swung away from home-ownership and back towards renting, it has been property investment and buy-to-let landlords that have taken up that slack and filled the gap in the market.

Renting is now viewed in a more positive light

Renting is no longer considered the pariah it was in the past. It’s in vogue to rent. People are more prepared to pay the higher cost of private rental properties than paying out on a mortgage. Today, there is little (if any) stigma attached to being a tenant and not a homeowner.

What do renters want?

Knowing what renters want will help you to find the best places to invest in property. UK investment property is diverse, and the best property investment opportunities for you will be dictated by your investment objectives and strategy. So what do different renters want?

Young renters want:

  • High-speed broadband
  • Satellite television
  • Extra services such as gyms
  • Proximity to nightlife and ease of travel to work

Silver renters want:

  • Local amenities
  • Connection to the wider community

Top among the options that renters look for are the condition of the property and the quality of the landlord.

What property investment is right for you?

When you purchase an investment property, you should have a clear idea of what your goals are. Do you want to gain from a rise in the price of the property, or do you want to benefit from property investment income? Or perhaps both?

Consider what type of tenant you want, and what type of property will attract that tenant. Read property investment guides, do your property investment research, and take less notice of newspaper property investment reports that misrepresent the facts.

The market isn’t flooded with students and young, irresponsible tenants. In fact, the majority of tenants – young or older – will treat your investment property as if it were their own home (which it is). And if you’re adamant that you only want to rent to older tenants, then there is plenty of rental demand to satisfy that strategy. Contact us today on +44 (0)207 923 6100, and we’ll help you find the right property investment opportunities to achieve your objectives.

Cheers,

David Lines

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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