As a property investor or landlord, your properties are your income, which means you need to approach them as you would in any other business or investment model. Of course, you’ll have to consider initial investments, repairs or maintenance, legal fees, property management fees and more, to figure out your ideal price model and net yield estimates.
But how much should you be aiming for?
As a general rule, you should be aiming for a net yield of at least 4% to make sure that your investment is worthwhile. If you work out that your yield may be less than 4%, then we recommend reconsidering your investment as it may cause you to lose more money than you make.
However, a yield of 4% is a healthy return and anything above and beyond that is excellent. You’ll have to be sure you know what you’re committing to before deciding on investing in property or becoming a landlord as it is a lot of work. There are many who fail in this industry because they underestimate the effort and time involved in making a successful career in property.
How can I increase my net yield?
Invest in a popular area. If your property is located in a popular or up-and-coming area, you are likely to be able to fetch higher monthly rents as tenants will be open to spending more on a desirable location. Make sure you do your research to find out what areas could be lucrative.
Although dealing with a low net yield may seem daunting, there are ways of increasing your rental yield. It’s important to be patient as increasing your yield may take time, and often some investment.
Renovations. Many properties in the UK are very old, having been built anywhere from 50 to 150 years ago in some cases. Although this certainly can add charm to the character of the building, this often comes with issues such as poor flooring, drafts, problems with plumbing, bad wiring, and outdated designs. We recommend taking on some renovations, depending on the state of your property, to bring it up to a desirable standard i.e. investing in double glazing, updating the electrics/wiring, replacing tired white goods, removing wallpaper etc. Although this can be an expensive investment, this will make your property much more attractive to potential renters who may be willing to pay a bit more in rent for a house that has all the charm of an old property but has a visually pleasing modern interior.
HMO. Registering your property as a House in Multiple Occupancy (HMO) often means that you can increase your net yield by having multiple unrelated adults paying rents. This only applies if you are able to have three or more unrelated people living in one property, so be sure that your property is fit to house so many people before pursuing this. Making your property an HMO will also reduce risk, as you will have other tenants to rely on even if one tenant doesn’t pay.
Extras. If your property has any desirable additional amenities, this could also help increase your net yield as you will be able to charge a higher rental fee. For instance, having a washer and dryer or even dishwasher included in the kitchen in your property can help elevate it and make it more desirable to tenants who would then be willing to pay a little more in rent. Other extras to consider might be a balcony or well-maintained garden, or if your property features a safe entrance with a concierge.
These are just some of the ways you might be able to raise your net yield to make your property business more profitable and rewarding. To take the stress out of being a landlord, contact us today to discuss our guaranteed rent London schemes and property management.
Contact us today if you have any questions and we’ll take care of the rest.