Property professionals in the rental space are under immense pressure to ensure that their rental book remains healthy. Tenants countrywide face a trifecta of challenges in rising inflation, increasing interest rates and continued slow economic growth.
Tenant expenses can be broken up into three ‘baskets’, namely debt repayments, rental payments and remaining disposable income, covering everything from groceries to entertainment and school fees. With inflation at 7% and even more on items like private schooling, groceries and healthcare, rental payments are the only expense category that is to some extent under the tenant’s control. Many simply cannot afford rental increases, so they move to smaller properties to avoid paying more rent. Property professionals in the rental space are under immense pressure to ensure that their rental book remains healthy. Tenants countrywide face a trifecta of challenges in rising inflation, increasing interest rates and continued slow economic growth.
Here are six pointers for rental agents looking to assist their landlords and tenants to maintain the health of their rental books:
1. Proper vetting of tenants
Data has shown that many tenants shifted into property ownership throughout the pandemic, leaving the rental market permanently. This removed many of the high-earning, economically stable tenants from the market despite rising interest rates, making it even more important to vet applicants. Above all, it’s important to review not just credit check data, but to combine it with tenant data. Diligently phoning references listed by a prospective tenant can also offer further invaluable insights, as will conducting a proper review of bank statements and salary slips.
2. Manage your arrears
The key to managing tenant arrears is to anticipate and deal with them immediately. With the increasing pressures on tenants, there is a high likelihood that they might miss a payment, or only pay partially, because they just don’t have the available funds. PayProp’s data shows that the larger the outstanding amount and the longer that the situation persists, the less likely it is that the account will ever be settled in full.
3. Use best-in-class PropTech
PropTech should free up property professionals’ time, allowing them to spend it on things that add value to their tenant and landlord relationships. Instead of balancing accounts, professionals want the freedom to focus on ‘people-centric’ activities like building relationships, keeping properties ship-shape and finding new opportunities to grow their business. PropTech like PayProp automates and optimises inefficient rental payment admin processes, freeing up your time, your money and your agency for more.
4. Protect yourself from cybercrime
Protect your landlords and your rental book with secure PropTech that puts you on the front foot. Cybercrime and fraud typically increase during tough economic times. To protect your rental portfolio, PayProp allows you to set permissions and control who does what in your rental business. An audit log also tracks all transactions that anyone with access to your portfolio performs on the system, allowing you to protect yourself further.
5. Find your ‘value add’
In economic downturns, a large portion of agents cut their commission just to keep a landlord on their books. But it’s very difficult to ever gain that percentage back once your landlords are accustomed to the lower rate. A far better way to approach the situation is to proactively increase the value you add to your landlord’s life. Using tools like the PayProp Owner app, which gives landlords visibility over damage deposits, detailed portfolio payments and other useful information, will add immediate value and bolster the relationship.
6. Be informed
It’s important to follow the trends in the rental market and track their effects on your own business. A good place to start is quarterly or annual data produced by various market players, including PayProp. Knowing your market can help manage expectations, especially at crucial times like the listing phase, when listing a property above market value could lead to extended vacancies.
Whilst market conditions are tough, many property professionals are adding value to their landlords and tenants, while managing to navigate the pitfalls to the benefit of their agency and clients. Going back to the fundamentals will help professionals to maintain healthy and strong rental portfolios.
This article was originally published in the PayProp Rental Index Q3 2022. Subscribe now to receive the latest residential rental thought leadership and market data every quarter.