Buy-to-let landlords in England strive to improve their rental income profits and capital growth from their property investments. To achieve this, landlords need to focus on enhancing their rental yield and attracting excellent, reliable, and qualified tenants. This blog provides a comprehensive guide on how to do just that in a competitive market.
Rental yield is a critical metric that helps landlords assess the profitability of their investment property. The annual return on investment is expressed as a percentage of the property’s value. To calculate rental yield, divide the annual rental income by the property’s value and multiply by 100. When doing so, don’t forget to exclude anything from your annual rental income that you regularly spend on the property/properties and maintenance costs, or else your yield percentage will not be accurate.
The next step is to research the market. Check out the location and its potential. According to our forecasting, research, experience, and frequently cross-referencing our data with our resources such as the Provestor, “city centres are bouncing back from the pandemic as professionals and students return to city living.” According to Zoopla’s most recent reports from 2023, City of Southampton provides a gross rental yield 5.54% Thus, look for areas with high rental demand, and potential growth/opportunities. These 3 are only a small sample of what you can find in the South East of England (to find out about other areas, reach out to us at Charters Estate Agents anytime).
By conducting thorough research, and conferring with our experts, landlords can also identify areas that offer attractive rental prospects due to amenities such as schools, transportation, and shopping centres. Investing in areas with these desirable aspects increases rental demand, which, in return, increases the likelihood of possible capital growth.
Once you have done your research, the next step is property selection. Choose a property that appeals to your target tenant profile. Invest in high demand features such as multiple bedrooms, parking spaces or an outdoor living space. According to a study by Ideal Flatmate, adding an extra bedroom to a 2 bedroom property can increase rental income by up to 30%. This shows the potential impact a property feature, as simple as having another bedroom has on your investment.
Another aspect to consider, to make a property more appealing and profitable, and to save yourself the headache of having to schedule, procure, and deal with constant repairs and tenant complaints, are renovations and improvements. Enhancing the rental appeal and value of your property through strategic renovations can significantly increase your return. For example, Zoopla reports a minor kitchen remodel can “yield a return on investment (ROI) of around 81%, resulting in increased rental income.”
Therefore, think about upgrading key areas such as the kitchen, and bathroom, or adding amenities like a separate laundry room or a snug. All of these changes make a property more attractive to potential tenants.
Setting competitive rental prices is vital to the entire process too. It is what attracts tenants and minimises vacancies. While it may be tempting to increase your rent, an overly inflated price can result in a property remaining empty. For instance, if similar properties (same size, amenities, and location) are renting for £1,200 per month, but, you set your property at £1275 then renters might pass yours and not even book a viewing. However, this is where the above research comes in. If you do have extra amenities that the other property does not or if you are in the same building but yours has a view, and the other property overlooks the parking lot then that could be a big bonus. Or, if you have additional windows, balconies, or a built-in wardrobe then it justifies the higher rental cost.
Long-term leases provide landlords with reliable tenants, reduce turnover, save money on advertising and vacancy periods, and reduce the risk of frequent turnover. This stability leads to cost savings on advertising and minimises potential vacancy periods. Offering incentives, such as slightly lower rent for longer leases encourages tenants to commit to extended tenancies.
Also, remember to keep your property well-maintained, and periodically upgrade it. This attracts and retains quality tenants. Timely addressing maintenance issues and making necessary upgrades contribute to tenant satisfaction too, which increases the property’s desirability.
In conclusion, maximising rental yield in a competitive market requires landlords to carefully analyse the local market conditions, select properties with desirable features, make strategic renovations, optimise rental prices, offer long-term leases, maintain the property, and more. At Charters Estate Agents, we are happy to walk you through this process. We have the local knowledge, research, and property experience to ensure you receive the best ROI.
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