How to increase the net income from investment property
Increasing rental yield requires a multifaceted approach that includes optimising fixed costs, understanding market demands and maximising property potential. By adopting these strategies, landlords can not only improve their rental income but also enhance the value of their investment over time.
Boosting rental yields is not just about increasing the rent charged. It also involves a comprehensive review of expenses and finding ways to optimise them. Fixed costs such as mortgage payments, insurance premiums and leasehold fees are good starting points.
Staying informed about market trends and areas with high growth
By shopping around for better deals on these expenses, landlords can significantly reduce their outgoings. This, in turn, increases the net income from the property, thereby improving the rental yield. It’s also crucial to stay informed about market trends and identify areas with high growth potential. These locations often offer higher rental yields due to demand exceeding supply.
In this article, we look at some of the ways landlords can boost rental yields.
Appeal of university towns
Another strategy to consider is investing in properties located in university towns and cities. These areas tend to offer higher rental yields due to the consistent demand for accommodation from students. Houses of Multiple Occupation (HMOs), although requiring more management due to higher tenant turnover, can be particularly lucrative in such settings.
Landlords should, however, be aware of the additional regulations and standards required for HMOs. Successfully managing these types of properties involves understanding the specific needs of your tenants and ensuring that the property meets all necessary criteria.
Maximising your property’s potential
To further increase rental yield, landlords should look at ways to maximise the use of space within their properties. This could involve converting unused areas into additional living spaces or improving existing layouts to make them more appealing to potential tenants.
Such enhancements not only increase the property’s rental value but can also lead to higher capital appreciation over time. Additionally, keeping the property well maintained and responding promptly to repair requests can significantly enhance tenant satisfaction. This, in turn, encourages longer tenancies, reducing the costs and time associated with finding new tenants.
Understanding your market
A key aspect of boosting rental income is a deep understanding of your target market. Knowing what potential tenants are looking for in a property can guide landlords in making informed decisions about refurbishments and amenities to offer. For example, in areas popular among young professionals, providing a high-speed internet connection and a modern, functional living space could make a property more attractive.
Similarly, in family-oriented neighbourhoods, ensuring parking and outdoor space availability can be a significant draw. Tailoring your property to meet the demands of your target market can lead to quicker tenancies and potentially higher rents.
Strategic rent adjustments
Charging a higher monthly rent to tenants is a fundamental method for improving rental yield. Nonetheless, fairness and market alignment are paramount. Engaging a letting agent to evaluate the local market rate for comparable properties is essential.
It may transpire that your current charges are either below or above the market standard. Incorporating rent review clauses in tenancy agreements presents the flexibility to adjust rent in line with market dynamics or property improvements.
Undertaking refurbishments
Ensuring your property’s condition warrants any contemplated rent hikes is crucial. Undertaking refurbishments and aesthetic enhancements demonstrate a commitment to tenant welfare, fostering a culture of respect towards the property.
Initiatives such as repainting, carpet replacement, and modernising bathrooms and kitchens can significantly uplift tenant satisfaction, making them more receptive to higher rental charges.
Securing longer-term tenancies
Maintaining long-term occupancy is instrumental in augmenting rental yield while reducing operational expenses. Fostering stable tenancies can substantially mitigate the costs associated with frequent tenant turnover, including re-letting fees and maintenance.
Implementing thorough tenant referencing, maintaining the property to high standards and cultivating positive relationships with tenants are key strategies to encourage longer stays.
Advantage of pet-friendly properties
Adopting a pet-friendly stance can distinguish your property in an increasingly restrictive market. Despite the Tenants Fee Act limiting landlords’ ability to levy higher deposits for potential damages, tenants’ willingness to pay a premium for the assurance that they can reside with their pets offers a lucrative opportunity.
This approach not only broadens your property’s appeal but can also contribute to achieving higher rental rates.
Energy efficiency and space optimisation
Enhancing your property’s energy efficiency serves a dual purpose: it contributes to environmental sustainability and appeals to tenants seeking cost-effective heating solutions. Properties that promise reduced energy bills and a warmer living environment can command higher rents.
Furthermore, expanding rentable space, such as converting an attic into an additional bedroom, can significantly elevate the property’s rental yield by offering more accommodation or improved living conditions.
Thinking of investing in a rental property?
If you are considering purchasing a property to rent out in order to supplement your income or as a full-time income, speak to our experienced team about your funding options. To find out more, contact our specialist team.
Please note: this is a long term investment which you hope will generate rental income along the way and a profit when you sell the property, but bear in mind that if you need access to some cash, a property can take time to sell or remortgage. If house prices fall, you might not be able to sell for as much as you had hoped. You would have to make up the difference if the property sold for less than you owe – a risk that increases, the higher the percentage you borrow. If you sell for a profit, you may have to pay capital gains tax. Don’t forget that with a variable rate mortgage, your costs will rise if interest rates go up. This would eat into, or even wipe out, your income and profit. It is recommended that you also maintain access to emergency funds to cover your mortgage payments during ‘void periods’ that may arise whilst you have no tenant and the property is not let. Please also note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
