Flats and terraced houses are the most profitable for landlords in London. However, this isn’t a hard and fast rule. Profitability also depends on a number of other factors, such as location and the property’s facilities.
If you’re a London landlord looking to invest in a rental property, working with an expert property management service can help you maximise profits and ensure that tenant demands are being met. At J Property Management, we work with landlords all over London to advise them on improving rental yields. Call Jessica on 020 3105 5898 to find out more.
What Type of London Property Is The Most Profitable For Landlords in London?
In London, the most profitable properties for landlords, according to recent research by Property Investor Today, are terraced houses and flats.
Here’s why:
Terraced houses – These properties have an average buying price of £580,000 with monthly rental costs of around £2,500 – a rental yield of 5.37%. This is significantly higher than the average rental yield for London properties (4.81%).
Flats – Flats, arguably the most common type of rental property, have an average yield of 5.08%. This is based on an average buying price of around £445,000 and monthly rent payments of around £1,800.
Semi-detached houses – With an average buying price of around £680,000 and monthly rents around £2,700, these property types yield returns of approximately 4.71%.
Detached houses – Offering the lowest rental yield for landlords (3.11%), the average house prices for this property type exceed £1,000,000 while rental prices range from £2,292 to £3,588 (according to data from ONS).
Terraced houses offer the best rental yields in London according to data
Which Locations are the Most Profitable for Landlords in London?
Within London, there is a great deal of variation when it comes to profitability for rental properties. In general, London tenants are looking to balance location with affordability. Places with good transport connections tend to be profitable for landlords as they attract both commuters and families.
Certain London destinations have demonstrated higher rental yields than others, with recent research by Track Capital showing that the top 5 most profitable areas to invest in are:
- East Ham (6.0%)
- Abbey Wood (5.8%)
- Thamesmead (5.9%)
- Hackney, Homerton (5.5%)
- Tottenham (5.8%)
In South London, the top 5 most profitable areas for landlords were:
- Greenhithe (6.3%)
- Thamesmead (6.1%)
- Walworth (5.9%)
- Erith (5.7%)
- Grays (5.7%)
(Data from PropertyInvestmentsUK)
Other Factors Affecting Profitability for Landlords in London
Beyond specific location and property type, there are other factors that affect rental yield, including:
Property Condition:
Landlords have an obligation to provide a property that meets the minimum conditions to be safe and liveable, conducting regular checks for issues such as mould or structural damage. However, on top of that, if the property is kept in a good condition, tenants are likely to pay higher rents, increasing overall rental yield. Regular maintenance checks and repairs can help to prevent damage and keep the property in good condition.
Facilities:
Fully furnished properties can also yield more rent, as it makes life more convenient and saves renters the hassle and expense of furnishing from scratch. Properties with greater access to facilities – such as high-speed wifi, dishwashers and on-site washing machines – also tend to be in higher demand. Additional things, such as access to parking, outdoor space, storage and security features like cameras can all make a difference.
The more facilities a tenant has, the more they will be willing to pay, maximising the rental income for landlords.
Energy Efficiency:
Landlords have certain responsibilities to meet energy efficiency goals, in line with the UK government’s net-zero target by 2050.
But energy efficiency is also a draw for tenants. Greater energy efficiency can mean lower running costs and bills, which is a big advantage for those looking to rent.
Maximising Profitability in London
There are certain ways you can maximise the profitability of your London rental property if you’re a landlord, including:
Avoiding Vacant Periods
Vacancies in a rental property are a killer – any period of time where a room sits empty is time that your rental property is losing money.
While this is sometimes unavoidable, there are certain things you can do to prevent it, such as having a fixed notice period with tenants. This gives you plenty of time to advertise to (and find) new tenants.
Working with a property management company can help you reduce void periods as much as possible. At J Property Management, we handle all of this for you, including screening reliable tenants and getting them into the property fast.
Flexible Pet Policy
With new property laws like the Renters’ Reform Bill coming into place in the UK, the government is working to make it easier for tenants who want to have pets in rental properties. However, many landlords are still not supportive of this idea. If you offer the possibility of having pets in your property, you open yourself up to tenants who may be willing to pay extra rent in exchange for having their pet with them.
Setting The Right Rental Price
It can be difficult to know the right rental price to charge, especially as you need to balance tenant demand and landlord profitability. Setting the price too low could attract lower-quality tenants and reduce your profitability. On the other hand, too high a price could deter tenants and leave your property empty.
Using a free online valuation tool can help you set the right rental price before you put your property on the market. Also, keeping track of local rental trends will help you decide if you need to increase or decrease your rent prices as you go.
Regular Maintenance
Making sure your property stays in good condition is key for maximising profit. Not only will a better-maintained property keep tenants happy and maximise retention, but it also means that you’re less likely to face issues or damages that will be costly to fix in the long run.
Regular inspections will help you keep on top of what needs maintaining or repairing before it becomes a problem.
Work With A London Property Management Service for Greater Profitability
From determining the ideal rental price to screening reliable tenants and conducting regular property checks, there are many ways to maximise landlord profit.
If you are a London landlord looking to maximise the profit of your rental property, contact us today at J Property Management to see how we can help.
