It seems like every year the London housing market hits a new high. Although some major companies have attempted to shift some of their bases to northern cities in an effort to cut costs and boost the economy outside of the capital, poor rail infrastructure and the sheer number of opportunities continue to draw people to London – not to mention all of the cultural events that the capital offers. Hot sauce festival, anyone?
Ultimately, London is one of the world’s primate cities – a city that contains a disproportionate share of the population in the country – and is one of only two Alpha++ global cities, alongside New York.
This, in turn, leads to an ever-increasing demand for rental properties. As costs rise and rent prices increase right alongside them, it’s important for landlords to be prepared. In this time of rising demand, what do landlords need to know in order to protect themselves and their investments?
London’s rental market
In the 2017 report on the London housing crisis, undertaken by the office of the Mayor of London, it was noted that the rate of economic growth in London has dramatically outpaced the available housing. New housing has also not been constructed at an adequate rate to meet the continuously growing demand. This has led to steadily increasing rents. While this initially seems like an ideal situation for landlords, it has its downsides. As rents rise too high, too quickly, they become unaffordable for large segments of the population, limiting the prospective tenant pool. The situation also generates social tensions that can make it more difficult to be a landlord.
The Covid-19 pandemic has had a noticeable effect on the demand for rental properties in London (and other major cities), as many people who were able to work from home attempted to find rental properties outside of the city. Lockdown heightened the allure of the countryside, with its wide-open spaces and larger living spaces for less expensive rents. However, it is highly likely that once the pandemic has passed, the rental situation will return to normal.
Insurance
When most people consider insurance coverage, they think of their personal property and their vehicle. For landlords, there is an extra concern. For landlords buying building insurance, there are many elements to consider. Does the policy cover damage to the property, such as fire and flood? If the property is let furnished, does the policy cover the contents? There is also the issue of rent guarantees. Many landlords also forget that in some circumstances they are employers – cleaners, gardeners and maintenance workers can all be considered employees and can be covered by the appropriate landlord building insurance policy.
Selecting the right level of coverage and the best insurance provider to meet your needs requires careful consideration and a bit of research. A trusted provider is always a good place to start. Speaking to insurance agents from each provider to get a detailed understanding about what types of coverage each provider offers, what coverage they believe you need, and how much it will cost will allow you to develop a good understanding of not only the norms between companies but also whether a particular provider is attempting to overcharge, or oversell unnecessary coverage. Having a provider that you trust is essential in such a hot market.
Deposit protection
One of the easiest ways to protect yourself as a landlord is to be proactive about using a tenancy deposit scheme (TDP). Not only is placing your tenant’s deposit into a TDP required by law, it also provides protection for the landlord. There are multiple different TDPs but they all function roughly the same: the TDP holds the tenant’s deposit for the duration of the tenancy and returns it providing there are no damages or any outstanding rent. The TDP will also hold the deposit if there is a dispute between the landlord and tenant, to ensure that both parties are protected.
On a less official level, a landlord who consistently uses a TDP and has tenants leave on good terms is more likely to attract better tenants by word of mouth and good reviews, rather than having to rely on an agency or whoever turns up first and pays quickest. Obviously, there is no substitute for a thorough background check and a well-written tenancy agreement, but it can offer a little extra peace of mind.
While being a landlord might sound to some like a way to make easy and reliable money, they overlook all of the work and investment that goes on behind the scenes. Keeping yourself, your properties and your investments safe requires that you are informed and well prepared.
