Week 30: Rental Demand
Hello everyone and welcome back. Feel strange typing this blog as I am sitting at a coffee shop where wearing a face mask has become the norm. As of 24th July the government made it compulsory to wear the mask whilst out in public. I'm just trying to figure out how to drink my coffee whilst wearing it!…...hahaha. Just kidding you can of course take it off for a short duration. I can’t help but feel like Jasmine every time I remove the veil...wonder if my Aladdin is going to join me any time soon. Anyway back to reality, so how does one assess rental demand in a particular area?
sparerooms.co.uk and openrent.co.uk
These two platforms are absolutely great to evaluate the area in terms of
market rate
rooms available
rooms wanted
and the types/quality of rooms on offer;
Let's take a look at each of the above in a bit more detail. It is a tedious task but I'm afraid it's something you can't skip as this will either give you the green light to go ahead or the dreaded red to stop. Which by the way isn't a bad thing, you will rather know now before committing to anything financially. You have to get this bit right if you are to make a success of it. This will help you understand if an area is suited for your strategy or not. It will help you determine your numbers after all just how much is the right rent? Ever wondered how people get to those numbers. Please don't rush this part, as boring as it is this is the ‘due-diligence’ everyone rants on about and it's so true when they say it's all in the numbers.
Market rate is the average rental in a particular area. I figured it started anywhere from £300 upwards (even less for single) to about £375. Once you hit the higher 3’s or 400 range you start to move into the large en-suite rooms and above. It is possible to get rooms in the £270/£280 range but this wasn't the norm. At this moment in time I am not considering en-suites so I will be looking at anything between £300-£375, with perhaps £350 being the magic number. If I can make my rooms look top notch then I can command the higher figure/upper three’s.
Ideally you want the rooms available to be similar (in terms of number) with the rooms wanted. This shows equilibrium and good balance of supply & demand. This task was fantastic as it showed me very early on which postcodes to avoid for two very different reasons. One popular area showed market saturation with price wars going on. You will know this as ads will particularly say 1st month rent half price etc and they were all charging lower-rates for good rooms which were proving difficult to fill. I never would have known this had it not been for this task.
Rooms wanted; are basically tenants putting up their request to seek a room in a given area. Here you will see what is sought after and where the popular patches are. If there are more tenants than rooms available then this is an excellent sign as it clearly demonstrates that there is scope to serve this customer base.
Lastly, quality of rooms or what's on offer. I looked at every single room on offer and can firmly conclude that the bar is highly raised and don't even think about cutting corners. Gone are the days where landlords can push forward grotty rooms (my bitter-sweet memories of student days). Tenants have become so sophisticated where en-suites, super-fast broadband, Netflix/amazon prime, and communal cleaning is the new norm.
Therefore, the modern tenant has the money and isn't afraid to vocalise ‘their wants’...