Rental yield – the returns that landlords get on their property investments – can be increased by lowering expenses, regularly reviewing rent and keeping the property in good condition to attract tenants.
The London property market presents an exciting opportunity for buy-to-let landlords that are looking to generate income from their properties.
However, new market dynamics, rising costs and changes in the government make it a difficult market to manage.
If you are a landlord that wants to increase your rental yield and improve profitability. then look no further – here, we talk you through exactly how you can do it.
What is Rental Yield?
Rental yield is the word used to describe the annual rental income as a percentage of the total property cost. It’s a key metric for landlords because they can see exactly how much of a return they get on their investment.
As many government bonds return around 4-5% interest currently, anything above that is generally seen as a good investment, with anything above 10% being highly profitable and desirable.
As a property market, London is unique. There is always demand for housing, and the city is home to a huge percentage of earners in the top 10% in the country. However, rental yields in London tent to sit around 3-5% on average.
Luckily, sometimes it just takes a bit of strategy and creativity to push that number up. With the right tactics, landlords can definitely help grow these yields, without having to invest too much more.
Ways To Improve Rental Yield in London
Keep Your Property In Good Condition
Like with anything of value, the more people want it, the more value it can command. The condition that a property is in can have a direct impact on what tenants are willing to pay, and how many tenants are interested.
It doesn’t have to be a huge refurbishment – even making sure the carpet is nicely kept and the walls are freshly painted can make a big difference.
If you want to really increase the value of your property, think about upgrading the kitchens and bathrooms – these are areas that can hugely influence demand with tenants and make the property more desirable.
If you can, improving the energy efficiency is also a good idea. Properties with a high EPC ratings are more valuable because energy is so expensive. Adding insulation, double glazing, or even solar panels lowers energy bills, making your property more attractive to renters. With lower bills to contend with, renters might increase what they are willing to pay on rent.
Use Your Space Well
London properties are not well known for their space, so finding ways to maximise the space can make it much more appealing.
For example, though expensive, a loft conversion to form a new bedroom, or even using other spaces to create a new room can hugely increase rental yield. They might be costly in the short-term, but adding a room can certainly get that yield up.
If you have an outdoor space, you could also consider building a small outhouse. This could be used as an office for example, releasing space within the house to create another room.
Adding built-in storage is also a good idea, as it means renters can keep their items tucked away, making the space they do have less cluttered.
Focus On Long-Term Tenants
Finding new tenants is an expensive (and long) process. It can involve a lot of viewings, contracting and periods where the property is vacant.
By investing in good relationships with tenants, they are more likely to stay. Think about what might appeal to them. For example, investing in new mattresses every so often can increase comfort – and servicing appliances can mean they work as best they can – reducing utility costs.
Review Rent Regularly
Of course, one of the best ways to increase rental yield is to increase the rent. Though this isn’t always a good idea.
It’s important to speak to a professional London property manager to help you understand how your property compares to others in the area. If you over-price it, you risk it not attracting any tenants. If you under-price, you end up leaving money on the table.
Try and stay clued-in on the area. In COVID for example, properties with outdoor space became more in demand – if you can dynamically react to these trends, you’re more likely to generate good investment returns.
Buy In Up And Coming Areas
The most popular areas of London are constantly changing. One minute an area is struggling to attract anyone, and then next it’s the new hotspot.
Have a look at what regeneration projects are planned for the coming years. That can give you a good indication of where you might be able to buy low and grow value.
Alternatively, think about areas that are popular with certain groups like students. Having a big house near a student hub means you can get higher returns through growing demand.
Again, consult a professional property management company, who can help you work out which areas might be best for you.
Lower Your Expenses
Increasing yield isn’t just about higher rents—it’s also about lowering costs.
If you have a mortgage, shop around for better rates. If you pay for utilities, look around for contracts that come with deals.
Remember, you can deduct these expenses from your taxable income – however the lower you can keep them, the better.
And it goes without saying, but having a property manager with fair and transparent fees is incredibly important. They will make sure that your property is well maintained, lowering the risk of any costly refurbishments, as well as charging you fair fees – which all come out of your expense pot.
Increasing Rental Yields
The cost-of-living crisis, rising interest rates and changing tenant expectations have shifted the London rental market.
However, these can also be great opportunities for landlords, especially those who can provide high quality rentals and the right prices.
Maximizing rental yield in London means landlords have to be both proactive and strategic. From refurbishing your property to choosing the right tenant, there are a number of ways to improve your returns.
If you need some help with this, why not start with a free online property valuation today, where we can help you unlock your rental property’s full potential!
