Energy prices are rising, utility bills are on the up and legislation around the energy efficiency of rental homes is getting tighter. This background of higher costs and stronger rules, along with the ever-louder conversation around climate change, is making all of us acutely aware of our carbon footprint and how much money we're wasting on bills. As a landlord, although you probably take pride in your rental property and take energy efficiency seriously, you might wonder whether making improvements is simply an extra cost to you with no benefits. Is it really worth your while? Well, tenants will pay more rent for - and stay longer in - a comfortable, warm and energyefficient home.
Your improvements will also protect the sales value of your property, increase your equity and give you more leverage to refinance and expand your portfolio. With that mind, here's our guide to being an eco-friendly landlord with a profitable and sustainable business.
TENANTS CARE ABOUT ENERGY USE
Nobody wants to pay more for their utilities than they need to, and with energy prices forever on the increase, tenants, just like everybody else, are looking at where their money is going. Even back in 2018, a survey by Prism revealed that 42% of tenants took energy efficiency into account when searching for a home. And when we're out on viewings, the question of running costs is a regular part of the conversation. Since the introduction of compulsory energy certificates, it's easy to see whether a rental property is economical to run and comfortable to live in.
With many tenants saving for a deposit to buy their own home alongside paying rent, energy efficiency is not merely an attractive option for them, it's the key to their future. Legislation is only going to get tighter in order to meet the Government's carbon emissions targets, so getting ahead of the curve will ensure your buy-to-let retains its spot as a first-choice option among high-quality, long-term tenants.
EFFICIENT HOMES = EFFICIENT RENTALS
We manage many properties and the most expensive and time-consuming homes for landlords are those where things keep going wrong. When outdated boilers and appliances start breaking down, the costs of replacement parts and visits from contractors soon add up. Unfortunately, nothing ever stops working at a convenient moment, and boilers in particular have a habit of dying in the middle of winter when your tenants need them the most. Having to deal with that and a heated phone call at 7am when you're trying to get ready for work is really no fun at all. Very simply, homes where things don't work properly are homes that tenants leave.
That means more vacant days, loss of income and reduced future rent when a property looks and feels out of date and costly to run. Always keep the longevity of tenancies at the front of your mind - you can't beat uninterrupted income for the best return on your investment!
ECO-FRIENDLY OPPORTUNITIES TO CHECK
You don't have to do everything at once, but making a list will give you a clear picture of potential improvements.
Quick upgrades include:
● installing flow restrictors on taps, showers and loos;
● fitting draft excluders to window frames and doors;
● adding thermostats to radiators;
● replacing any outdated appliances. These can all be done during the working day without disturbing your tenants.
Larger works to consider:
● loft insulation;
● plugging gaps in exposed floorboards;
● replacing a boiler;
● renewing drafty old windows These all make a big difference to the energy efficiency, comfort and rentability of a home, but they can also be messy and disruptive and we'd generally advise carrying them out between tenancies. PROJECT-MANAGE YOUR UPGRADES Creating a timetable of energy-efficiency improvements will help you keep on top of legislation with a property that retains its tenants and value. It's really worth setting it all out so you can decide what to prioritise, what to plan in the future and what makes financial sense now and later on. As well as obtaining quotes for any works to be carried out, check whether contractors will pick up the materials for you, or whether you need to order them yourself and have them waiting at your property. Ordering appliances may need some market research for the best deal, then liaising with your tenants over a delivery time, arranging installation and having the old items taken away and disposed of. A good managing agent can organise all of this for you and check that works are complete without you ever needing to visit or make a call.
BALANCING CASH FLOW & COSTS
As with any business, cash flow is king! Some energy-efficient upgrades like flow-restrictors cost so little that you'll hardly notice the difference in your pocket, but for larger expenditure around insulation, windows and heating, you may find it makes more sense to spread your outgoings over time. You can often find interest-free offers on white goods from large retailers like Currys, and they'll even remove your outdated appliances after installing new ones.
For more expensive works, have a chat with your financial advisor. Remortgaging your buy-tolet is often the most financially-efficient way to invest in improvements without large upfront expenditure that leaves a hole in your income. So-called 'green mortgages' are becoming more widely available and offer lower interest rates for either purchasing an eco-friendly home, or retrofitting an older property.
Energy-efficient upgrades are about so much more than simply keeping up with legislation. With the right execution they make sound financial sense and help you attract high-quality, long-term tenants and increase your income by creating a feelgood-factor around your portfolio.
We've helped many landlords to maximise the demand and yield for their buy-to-let homes, and we can help you do the same. If you own a rental property in Southampton and you'd like to talk about making the right improvements, call for a chat on 02380 987610 or email email@example.com - we'd love to be your managing agent and help you grow your business and passive income.