Parello Q&A: Advice for Landlords in 2024

An interview with Nick McCance, Parello Founder, reveals his advice for landlords for 2024.

How would you assess the current state of the rental market? 

The current state of the rental market is extremely buoyant.  This is following an exceptionally busy end of the year for agents and landlords, with rental property demands tripling compared to pre-COVID demand. 

We have seen the supply and demand gap narrow, but in Manchester it continues to heavily outweigh supply.  This is a substantial gap that is likely to continue throughout 2024.

Rental reforms are edging closer this year and could become law, including plans to ban Section 21 evictions.

Rental values are also expected to continue rising, although at a slower rate.  And, of course, we are heading towards a general election, which will likely have an effect on the rental market.

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What key trends or changes have emerged since the beginning of 2023 that landlords should be aware of? 

Over the last 12 months the rise in rental values has been one of the biggest trends we’ve seen, with rent in the Manchester area increasing by 19.6%. 

I think a lot of landlords have potentially become comfortable with their return and where they are with their tenants, especially since our recent spell of low inflation and low interest rates. 

But, you should be mindful that the further along tenants stay in properties without a rental increase, the further out of kilter they’re going to be with market value. This can leave tenants vulnerable to eviction.

Even more so since mortgage payments and day-to-day costs have escalated considerably for landlords in recent months, resulting in landlords not making as much, or breaking even. 

The whole point of property investment is to make money.  So it is important to really keep an eye on rental values and keep them up to date. 

We’re not saying exploit rental values, instead keep it at a manageable remit which will give the tenants a good deal, but also the landlord is still getting a good deal because they’ll be earning more than they were doing in the previous year. 

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What problems can that cause when coming to either the end of a tenancy or you’re looking to sell the property?

If the rental value isn’t where it should be and you are looking to sell the property, investors will look at that negatively.  An investor is typically looking for a 6 or 7% return on investment, so it’s only natural that if you want the most amount for your property from an investor, the investor will also want the most amount on return. 

A return beneath 6 or 7% will raise questions with investors and create a hurdle that will be tough to overcome. 

It doesn't benefit the tenant either, and instead puts them at risk of eviction. When rent has gone so much out of kilter, to suddenly increase to market value or thereabouts, it will mean raising the rent too much in one go.

Over 30,000 people in the UK were facing eviction prior to Christmas. An avoidable number of these will be because rental values were not regularly updated inline with the market value. 

It’s best to keep rent at a reasonable amount which is both comfortable for tenants and landlords, so, if you do end up wanting to sell a property, a new landlord is going to be at a reasonable return, not very far away from the market value.

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What are the evolving expectations of tenants likely to be in 2024?

Expectations will definitely vary a little bit, and it will mostly relate to the area.

Tenant expectations and wants are ever-changing, and are becoming much more higher-end.  Because there are so many new things, it can be like keeping up with the Joneses.

Take the city centre, for instance, there is currently lots going on with many new developments going up.  You also have Deansgate Square, a beautiful development, which will face heavy competition from the nearly completed Viadux Residence Tower. 

This will create a lot of competition in the city centre within a short space, resulting in rental values being very similar and more expensive than, say, suburban areas like Salford, Walkden and other surrounding areas. 

Prospective tenants want to know what these areas have to offer; how’s the commute? Is the rent reasonable? 

Walkden, for example, is an up-and-coming area with its twenty minute commute by train to the city centre; Bolton is another easy commute by train for an extra ten minutes; Leigh and Wigan have the B1 and B2 bus route, which is a half an hour, forty minute commute into Manchester; and Salford is close to the Met. It also has easy access to trams going into Media City and the city centre. 

In Walkden, a typical two-bed terraced house is about £750-800 per month. It’s the sort of prices you won’t find in the city centre.  Bolton will likely save you another £100. Leigh and Wigan, all so much cheaper.  It is why the demand in suburban areas is very high.

These areas are becoming more and more popular, which is typical of the London effect: you get the booming city centre and then it all starts spreading out like a growing bubble.  And the Greater Manchester bubble is certainly growing.

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What are the crucial legal updates or regulatory changes that landlords should be aware of in the coming year? 

The Renter Reform Bill is something all landlords need to be on top of. Momentum is gathering and it's likely we'll see Section 21 abolished in the next eighteen months. 

Landlords can't wait to see if this occurs, it's essential they have plans in place. Our team of advisors is on hand for any landlords who are concerned, or need help assessing the impact of these changes.

The new reforms will see changes to the law regarding rented homes, fixed term assured tenancies and many other changes that can be difficult for a busy landlord to keep up with. 

Unfortunately, issues do arise when rental values haven’t been kept up to date. Sometimes the only solution is to lose the tenant. This is where a professional agency, like our team, can come in to have these difficult conversations.

Especially if you are a landlord with a packed portfolio, you may have to have several of these tough conversations.  It’s unpleasant and can cause sleepless nights.  But you can benefit from an experienced agency having these conversations for you.   

And with the changes in regulations looming, if you know that you either have a problem tenant, or if you expect you’re going to need that property back,  it is best to act early rather than delaying as you risk facing problems further down the line, particularly if the Section 21 eviction is abolished. 

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What property management strategies do you recommend for landlords to maintain high tenant satisfaction and retention?

Definitely make it easy for tenants to get in touch and report issues.  You want to build a good relationship with a tenant, so it really does help having somebody available to respond to issues and resolve them quickly. 

If it’s a faff for the tenant to report an issue then they simply won’t, and you’ll be in for a nasty surprise when you visit your property, especially if you don’t regularly check your property. If a tenancy is over and you then visit your property you may find several issues with your property that haven’t been resolved.

To avoid this, we recommend regular property visits, maybe two or three times a year, but most importantly make sure you have a reliable reporting system in place. 

With our system, tenants can visit our website and report their issues. They can upload photos of their problem and it will come through to our email. and that gets passed on to a contractor.  Everything is very slick, from start to finish. 

Finally, it’s always helpful to really know your tenants and what they want from a property.  Speak to them, take their feedback seriously and always have good, transparent communication, and you’ll soon find yourself having a high retention rate.

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Are there specific technological advancements or tools that landlords should consider implementing to streamline property management?

AI is impacting almost every sector, and we're no different. Parello uses AI extensively to enhance the tenant experience and improve reporting and performance for landlords.

We're running trials at present which are showing real signs of success in the use of AI to reduce void times.  It’s vital that properties have as little void time as possible, and with AI, that is being made extremely easy. 

Linking AI to our CRM allows us to remarket properties almost instantly, and match properties with people on our database.

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What financial advice would you offer landlords to maximise returns on their investments in 2024?

Have a plan.  Know what you want to be earning by the end of 2024 and set short-term goals throughout the year to measure your progress.  Regularly check your performance against your goals so you can keep on track and make tweaks to your plan when necessary.

Be prepared to deal with any problematic tenancies early on.  The section 21 notice could be abolished in the near future so it’s best to be proactive with any difficult tenancies. If you delay this, you may find new challenges further down the line. 

Make sure that your properties are in a good condition.  Rental demand in Manchester is very high, so if you've got a tenant leaving be sure to check the property early and resolve any maintenance issues.  With excellent problem management, the property will be available much quicker for that next tenant, keeping the void time to a minimum.

Stay on top of the latest industry news and regulations - or hire an agency to do it for you. There’s a lot happening in the market in 2024 with looming changes to regulations, a general election, and the changing expectations of tenants, it can sometimes feel like you are spinning one too many plates. 

Agencies can play a big role in your 2024 plan by taking the weight off your shoulders by keeping on top of regulation changes and sourcing the reliable tenants, allowing you to focus on building your portfolio. 

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What final piece of advice would you give to landlords to thrive in the rental market moving forwards?

Be open to investment.  If your plan is to maximise and expand your portfolio, now is the time to be doing it.  There are plenty of great deals out there for landlords. 

With an increase in mortgage rates, we’ve seen prices for property in Manchester fall dramatically over the past 12 months which has allowed investors to get bargains. 

That’s what our team of specialists do for our landlords. We look for every opportunity to put our landlords in front of the best deals, so they have the choice to make the investment or not.