Rental Rewards

Melissa Williams, Marketing Manager at Lettings franchise Northwood, reveals why in contrast to the current UK economic downturn, the private lettings industry has never been more buoyant.

More than 3.6 million homes in England are currently being rented – a figure that will only increase in the foreseeable future. 2013 will be the first time in half a century where more people are living in private rented accommodation than in social housing. Forecasts from the Joseph Rowntree Foundation indicate that an extra 1.5 million 18 to 30 year olds will be renting by 2020. So what’s fuelling this boom?

Rise of the accidental landlord

There has been an increase in the number of ‘accidental landlords’: homeowners who rent their properties out of necessity, for reasons including needing to relocate for work or simply not able to sell their homes, and the Residential Landlord Association (RLA), now estimates 300,000 exist across the UK.

This, in part, has contributed to the rise in distance landlords, where the landlord lives in a different area (and in some cases country) to his or her property. According to the Association of Residential Lettings Agents (ARLA) there are almost twice as many rented properties in central London than there are landlords which themselves reside in the capital. Long distance landlords are also prevalent in Scotland, where there are 1.74 rented properties for every one landlord living in the country.

The buy-to-let boom

The total value of mortgages taken out to fund buy-to-let purchases continues to grow, with recent Council for Mortgage Lenders statistics showing that the UK’s 1.4 million buy-to-let mortgages now represent an estimated 12.8 per cent of the property sector, compared to just 7.5 per cent in 2010.

Furthermore, with total rental income to UK landlords in the private sector predicted to rise to £70 billion in the next five years, together with strong tenant demand and rising rents, the appeal of buy-to-lets as a viable investment opportunity looks set to remain.

In direct response to this trend, letting agents – such as Northwood – have started to introduce buy-to-let services in a bid to encourage small investors and first-time landlords to build their portfolio.

With two-thirds of tenancies now involving a letting agent, the lettings market represents big business and an attractive franchise opportunity. Letting agents can handle a range of letting-related jobs, charging commissions based on the level of workload that they take on: from simply finding a tenant through to fully managing the property. It’s an invaluable service for landlords with busy lives and who are time-poor.

Why Northwood?

Northwood started life in Portsmouth in 1995. Since then it has expanded steadily and, over the past five years, is defying the recession by growing 20 per cent year-on-year.

The business represents a unique business model within the lettings market. Northwood’s ‘Guaranteed Rent’ service – a minimum 12 month contract to the landlord during which Northwood manages every aspect of the tenancy and effectively becomes the tenant – has been a cornerstone to its success. It means that, regardless of the state of the rental market and even if the property is vacant, landlords are guaranteed to get their rental income every month without fail.

This is a significant point of difference in the market and over 11,000 landlords have signed up to the ‘Guaranteed Rent’ service to date and now represents over 85 per cent of business. It’s a proven and profitable strategy that has cemented Northwood as a leader in property franchise opportunities.