Are Room Rentals A New Trend?

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I’ve been noticing some room rental trends in our area so I thought I would share them with you. If you believe everything you read in the press, we are apparently in a market of strong rental demand, due in no small part to the lack of mortgages which is stopping first time buyers entering the sales market.

As the recession bites more, it’s likely we will see a more transient form of workforce, one that is moving around to find work. We also still have a high level of immigrants and lets not forget the potential fall out from the governments housing reform, which will all continue to have an effect on the rental sector. For a landlord this represents an opportunity.

Local Changes

Room by room renting locally for us has become way more competitive.We have a huge influx of a new type of letting agent. Our area has a strong demand for these and they have long been a staple for many local landlords because they produce a high yield. As a rule, in a normal market, letting agents wouldn’t go near room rentals because they are time consuming in set up and require more effort to run. Agents prefer an easy life.

Agents Move In For Easy Pickings

At least 4 new agents specifically dealing in room rents have recently hit town. Now, I have to say I think the reason for this is due to a couple of factors. Firstly, there is a lot of new infrastructure being implemented which will bring new jobs to the area, and secondly, I believe it is in part down to the general economy. These new agents are taking business away from local landlords because they have more marketing power due to being able to advertise on of Right Move etc.

Agents are quoting an “all in price” where the landlord gets a guaranteed rent and the agent takes the uplift in profit. Now, I wrote about this as a strategy about a year ago, due at that time to the large amount of new “accidental landlords,” who didn’t know what to do in this new market. So now we have a scenario that becomes a lot more profitable for an agent.

Typical Local Example:

  • 4 bed house rented as single dwelling: £900 pm
  • Rented as rooms potential £2,000 pm
  • Minus all-in bills for tenants £200 pm
  • Resulting Profit:  £1800

As you can see there is a significant room for manouvre in what you can guarantee for a landlord. Assuming the landlord bought in the last five years when prices were high, then the average mortgage would have come in at about £7-800 per month locally. So it’s clear to see that agents can make a tidy profit. Due to the increased competition from agents, this time when we were looking for a new tenant we had to be a lot more pro-active to get the tenants in our houses and not in theirs.

How Did We Combat Agent Competition?

We advertised in more places this time for our room rentals, including London and local Gumtree, and, on local big employers noticeboards. Another good place get tenants is over the water in Ireland. The Irish economy is tanking right now. Look for Irish recruitment agencies that send workers to the UK, many will want to live in shared accommodation.

If you have good schools, look for recruiters that deal with foreign teachers on placement- or student teachers, they often do their first year in the UK. Make sure you contact all those who are interested straight away. If you don’t an agent will get there first.

Have you noticed changes in your area? If so what are they and how have you overcome them?

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