The traditional 'one-man-band' buy-to-let landlord, with just one or two rentals, could easily go the way of the corner shop when Tesco came along, if they fail to compete.
Lots of private landlords have had it relatively easy until now as tenants have had little choice but to take what?s available, given the shortage of supply of really high quality accommodation and an insatiable tenant demand in some locations.
But this may be about to change for some small-scale landlords. It does not necessarily mean they will be driven out altogether; it simply means that many will be faced with meeting competition head?on, by providing good quality accommodation at a competitive price and managing in a professional way.
But fore warned or fore armed: there?s no reason why the small-scale landlord should not compete with the big boys if they build a large block in the vicinity; just like a travel lodge against a small B&B, the latter is often preferable to the traveller.
These large investment and management companies are thinking they can benefit from the general perception, drummed up in the media of late, that tenants are dissatisfied with small-scale landlords. Official figures are showing that those living in the private rented sector (PRS) have the highest housing costs but the poorest quality housing in Britain.
In many instances these assertions may be true, but there are many levels to the PRS, and it is likely the large-scale landlords are only interested in certain segments of the total market.
According to the Financial Times, insurance and investment giant L&G announced its second deal in the sector last week: a 90-home, £16m scheme in Manchester. It is also building 300 homes for rent in Walthamstow, north London. L&G say they aim to invest £1bn into private rented housing in the coming years
L&G is far from alone. Sigma Capital founded in 1996 and admitted to the AIM market in April 2000, with offices in Edinburgh, Manchester and London, is focused on residential development , in particular Private Rented Sector housing and large scale urban regeneration. Last week Sigma announced their plan to build up a portfolio of 10,000 UK homes, backed by sharia-compliant lender Gatehouse Bank.
Moda Living, a partnership between Caddick Group Plc and Generate Land Ltd, both with a history of successful developments, claim they are a market leading combination delivering purpose-built Private Rented Sector (PRS) accommodation on a large scale. Focusing on key cities across the UK, they currently have 2,750 units under control, and they are building a pipeline that?s set to exceed 5,000 units.
Moda claim that their developments are all high-specification, designed in line with the Urban Land Institute UK?s 'Best Practice Guide for Build to Rent' with the aim to set new benchmarks for the quality of their residents' experience in cities including Manchester, Liverpool, Leeds, Edinburgh, Bristol and Glasgow, while innovative micro-living specialist The Collective is building rooms for rent in London.
Other specialist large-scale landlords including Essential Living, Fizzy Living and The Collective also see the benefits in attracting Britain?s growing army of 'generation' renters.
As well as home gown competition, small-scale landlords will also face competition from international investors as well: Investors such as Canadian landlord RealStar Living, based on their experience of managing residential tenants in their home market, are entered the British market in October, after they gained planning permission for a 45-storey tower of rented homes in Elephant & Castle, south London.
There is no doubting that these companies' stated investment intentions are based on good research and solid foundations: market growth is assured. With home ownership now less affordable, the number of households living in rented housing has grown by nearly 30 per cent in the past five years alone, now reaching 4 million.
Paul Stanworth, managing director of L&G Capital, told the Financial Times that rented housing was 'a good match for our money?.
?The long-term commitment to develop and hold this asset removes short- termism in approach to quality and service, whilst the scale of developments that our investment can facilitate allows us to maximise operational efficiencies, thereby passing on lower rents to our end users.?
Small scale private landlords with a small number of buy to lets will always have the advantage of personal service and an ability to under-cut expensive high end accommodation with professional management. They will attract tenant providing their properties are presented to a high standard giving good for money.
However, increasingly complicated and onerous regulations and complication in evicting bad tenants will hit small-scale landlords harder than the professionals as they have the manpower and financial clout to offset problem tenants.
Small-scale landlords will need to be more diligent in the way they present and manage their properties and more professional in the way they market them ' in other words, they will need to work harder at making as success of their buy-to-let that they have had to do to-date.
Article courtesy of LandlordZONE