Marketing a rental property to tenants
It’s important that landlords communicate the right ‘message’ to the right people; in this case their prospective tenants. In order to do this effectively, landlordsneed to have first established who their customers are likely to be. This will all help a landlord in finding good tenants.
A landlord should have a clear idea of who they are likely to be letting a property to before even purchasing a property. Identifying the type of tenant and the rent they are likely to pay is all part of any calculation of a properties investment returns.
The clearer a landlord is on who their likely tenants are to be the better the more targeted their marketing can be.
To help identify who they are targeting a landlord should ask themselves.
1. How old are their likely tenants?
2. What type of socio-economic group does the tenant belong to?
3. Does the tenant have a job?
4. What type of job does the tenant have?
5. Does the tenant have a car?
6. Where does the tenant work?
7. Does the tenant need public transport?
This Marketing Assessment doesn’t have to be lengthy or complicated. It’s just a way of a landlord understanding a tenant’s motivations and characteristics and where they might find them.
Marketing theory teaches us that there are multiple channels of communication with your customers. In the case of a landlord and tenant, the main ones are:
- Press advertising
- The internet – online letting sites.
- Direct advertising
- Letting agency listing
- Informal networks – ‘word of mouth’
The imprecise nature of marketing means that landlords should always seek to maximise the chances of reaching their ‘ideal tenant’. This can be best achieved by landlords utilising a multi, rather than a single channel approach. By doing this landlords will increase their chances of communicating the details of their product to the tenants, in this case their investment property. For example: by landlords using the Internet & press rather than just the local paper. Having already visualised their tenant, the landlord should imagine the sources that the tenants will use in their search for accommodation. All this information can then be used to refine the landlords’ Property Marketing Plan.
A marketing plan for a rental property
The marketing plan doesn’t have to be huge. A few bullet points will do. Think through; who, why, where? Focusing on the characteristics of a landlords potential tenants.
For instance it might be that:
A landlord has bought a two bedroom flat. It’s in a nice area and has a good view. The size and location means that it should therefore appeal to a professional couple or even two sharers. The landlord knows that the area is popular with inward locators because of the proximity of a large business park near by. The letting property has no garden and is therefore probably not suitable for a family. However, it is within easy access to bars and restaurants and therefore should appeal to younger occupants. The rental level probably puts it out of reach of recently qualified graduates.
So there you have it. A profile of the likely tenants would suggest to a landlord a 25-35 year old professional couple or two sharers.
Now a landlord has established a tenant profile; in order to complete the Property Marketing Plan landlords will need to work out how best to market their property. The potential scenario could be as follows:
A landlord knows that their local newspaper has an advertising feature for rental property on a Tuesday. So for a landlord, to start with an ad in the newspaper would be good. A landlord’s potential tenants may well be inward locators and being young and educated they are very likely to use the Internet, so an Internet presence is essential. There are numerous letting websites. One site which is owned by e-bay and is easy to use and also free to place letting adverts is www.gumtree.com . A landlord decides therefore to post a letting advert on this site. The nature of the area and the type of tenant a landlord aims to attract means that a letting advert in the local shop, an Asda hypermarket in this case is unlikely to be successful. A landlord should know that the letting market in the area is buoyant. The existing tenants aren’t due to move out for another 5 weeks. The landlord is comfortable doing the letting themself. So the landlord decides to hold off getting an agent involved; deciding instead to test the market. The landlord has a friend who works for one of the large firms based on the local business park. Therefore a message on the company intranet is another option. Having run through this process the resulting Property Marketing Plan should look a bit like this:
PROPERTY MARKETING PLAN for No.14 Kendal VillasT
enant Category, Professional, 25 –35 yrs, Single / couple / sharer
Channel of communications
Channel 1 – Local press –add twice a week in Tuesday property supplement & on Saturday
Channel 2 – Internet – property marketing site national coverage
Channel 3 – Direct marketing – company intranet
Channel 4 – Informal networks
Overall strategy – DIY approach/ test market/ possible ‘twin track’ if low response after 2 weeks of initial marketing
The great thing is that once landlords have prepared a few property marketing plans they should be able to conduct the whole process without pen & paper. A landlord should instinctively know the tenant profile for an investment property and the ways to market the investment property to their prospective tenants.
The landlord may have picked up under the heading Overall Strategy the term ‘twin tracking’. This is an approach that I have employed successfully for many years in marketing my investment properties. The term is actually derived from an old trick where property developers would run two concurrent planning applications to get round the planning appeals system.
The dark art of ‘Twin tracking’
I’m convinced that it is possible for landlords to ‘have their marketing cake and eat it’ if they use a ‘twin tracked’ approach. The concept is all based around the fact a landlord can demand a little more rent up to 10%, if the landlord goes through a letting agent. However, as landlords are no doubt aware, agents don’t work for free. On a six-month let a letting agent’s fees can account for a good 15% of a landlords total income. Therefore if a landlord can do something to reduce the net effect of the letting agent costs, this is going to have a positive impact on the landlord’s total returns.
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How does ‘twin tracking’ work?
Well for example, a landlord has an investment property that they are confident will achieve £1000 per calender month if they advertise it privately. If the landlord advertises the same investment property through a letting agent it is likely that the landlord could potentially uplift their rent by between 5-10%; bearing in mind that the landlords initial figure was commercially realistic. If the letting agent thinks the landlords expected rent was too high then maybe their initial estimate was too ambitious.
Once the landlord has settled on the two figures, then the next step is to advertise their property privately as well as using a letting agent. Landlords should not go overboard on the private marketing because of the costs. An letting advert in the local paper and through a free or cheap property marketing site will probably suffice. A landlord now has a private letting advert for their rental accommodation of £1000 per calender month and a letting agent marketing it for £1100. Having a letting agent provides the landlord with direct access to their tenant list as well as giving the landlord exposure via the Internet to letting agent only websites such as Rightmove, as well as commercial letting advertss in the property press and a letting board outside the investment property. By taking this ‘two pronged’ approach the landlord has increased their channels of communication so multiplying their chances of attracting a suitable tenant. Now all the landlord has to do is to keep their fingers crossed! Let’s examine the financial merits of the two approaches:
|Rent received 6mths||+£6600||+£6000|
|Speculative rent premium||+£600||+£0|
|10% of £6600 + vat @ 17.5%||-£775.5||-£0|
|To let board||-£0||-£30|
|Total marketing costs||-£845.5||£-100|
|Real marketing cost (speculative rent premium – marketing costs)||-£245.5||£-100|
|Total net income (income – marketing)||£5754.5||£5900|
|Variance (net income agent vs. DIY)||-145.5||+145.5|
Scenario 1. The letting agent comes up trumps!
The letting agent delivers the perfect tenant to the landlord, who is prepared to pay the speculative £1100 pcm. As landlords can see from the table the real marketing costs, taking into account the speculative rent premium is a more acceptable £245.50 as a posed to the actual cost of £845.50. The latter represents 12.8% of the 6 months rental income, not an insignificant amount to a landlord.
Scenario 2. Property let privately
If we now assume that the landlord lets the property privately for £1000 pcm. It has however only cost the landlord £100 to market the investment property. The landlords net income is still near the £1000. In fact, the landlord would be over £145 better off over the 6 months than letting the property through a letting agent. A couple of points I would make to landlords about this technique.
1. It is possible for landlords to find letting agents that will work for less than the 10% used here. For example, there are likely to be letting agents that use a fixed letting fee approach. Therefore, letting costs fall proportionally as rents rise.
2. The other is that I have based my financial model over 6 months. The average tenancy is actually 9 months long. In which case the premium rent would have covered the landlords entire marketing costs for the letting.
The main point of ‘twin tracking’ beyond these subtle variations in rents and costs, is that it maximises the landlords’ chances of getting a tenant by employing a greater number of channels of communication with a landlords potential tenant. This should ensure that landlords avoid the nemesis of the ‘rental void’! Remember, one month letting voids far outstrips even the highest marketing costs for landlords!
A word of warning! Landlords should only use this approach selectively. Some letting agents don’t mind landlords marketing their property independently, but check with them first. It is worth landlords knowing that in practice these restrictions are very difficult to enforce, and rarely acted on. However, if landlords do contravene the letting agency contract then they should be aware that they might risk legal action being taken.
The reality is that letting agents are like all of us. Letting agents work hard for their money and don’t appreciate being used and abused too blatantly, even if they know it goes on. If landlords wind them up sufficiently they will refuse to act for them, which could become a hindrance in the future.