It is, perhaps, the busiest time of the year for the residential rental market: families returning from holiday, schools re-starting, a new university year, career changes, often involving a move of several hundred miles; all factors that have a major effect on demand for rented accommodation.
However, this busy-ness is reactive rather than proactive, as for letting agents it’s all about getting tenants settled in rather than finding them accommodation that will already have been secured weeks or even months before.
It’s also a time of year when the sales market perks up as first-time buyers or current owner-occupiers seeking to trade up try to get sorted before the clocks go back at the end of October. So, all in all, not the best time for anyone seeking to enter or expand within the buy-to-let sector.
Conversely, however, this means that autumn offers good opportunities for landlords to liquidate because they will have the dual benefit of demand from both owner-occupiers and other investors. The question they must ask themselves is: should I focus on one type of buyer or try to appeal to both?
Action will depend on the individual. However, location should be a factor in reaching a decision. If the property is suburban then my instinct would be to appeal to home-owners as this is where the majority of interest will come from. Any potential investment buyer will anticipate lower-than-average rental returns and this will obviously be reflected in the price offered.
Strangely, though, owner-occupiers do not seem to be deterred from purchasing properties (albeit mainly flats) in locations with a high rental turnover.
For example, I am consistently amazed by the number of buyers desirous of living in the Bruntsfield/Marchmont districts of Edinburgh who do not bother to check just how many properties in their stairwells are rented out. For some (especially younger buyers) this may not be an issue but I do know that others do not realise they will be living above, below and perhaps across the landing from neighbours with more transient lives – and lifestyles.
So there are locations where landlords can expect equal interest from both the home-owner and investment sectors, in which case it boils down to weighing up the cost-benefit of preparing a property for the respective markets.
Trying to sell to owner-occupiers can exploit the “wow” factor, ie when some viewers become so enamoured with the “look” of a property they go the extra (financial) mile to secure it, resulting in the vendor receiving a healthy, and unexpected, premium on the sale price. The downside, of course, is that to create said “wow” factor the landlord may need to spend a substantial sum on internal refurbishment.
Unless entirely new to the game, the investment buyer will be ruled by the head, not the heart. This person will have already calculated the likely rental income and weighed this up against outgoings.
Even before viewing there will already be a figure in their head beyond which he or she is unlikely to budge and which will almost certainly be below what could be achieved if sold to an owner-occupier. Still, the cost of updating the property’s internal features will be substantially less than preparing it for owner-occupier buyers and the vendor can likely look forward to a seamless sale and quick exit.
Some landlords believe the best price can be achieved by selling on the property with a tenant in situ but this often does not work out. Any landlord who unexpectedly turns up to show around a potential buyer will be in breach of the lease agreement. Even if asked in advance, most tenants object, and are within their lawful rights to do so.
So my message to anyone thinking of taking this option – before doing so make sure your tenant is prepared to play ball!
• David Alexander is managing director of DJ Alexander