We recently wrote about proposed changes to the HMO marketplace, but with government changes to stamp duty coming too, it seems that being a successful British landlord is to get more challenging.
One of the keys to a successful (and profitable) property portfolio is ensuring a healthy yield on your investment. Fortunately, there are a number of ways that landlords can ensure that they’re getting the best returns profitable…
Find the Right Tenants
You might think that all tenants are equal – but you’d be wrong. A good tenant can be worth their weight in gold, while troublesome renters can cause no end of headaches.
Selecting suitable tenants helps to maximize your cashflow by ensuring that the rent is always paid on time. Careful tenants, who take care over your property, will also minimize your costs of maintenance. Lastly, when you rent to serious and financially-solvent individuals you’ll minimize your vacancy rate, keeping that rent book working month-after-month.
In days gone by selecting suitable tenants was often pot-luck. Fortunately, with the help of Upad, it’s easy to vet potential tenants, gather verified references, deposits and rent. What’s more, the “done for you” service means that finding the right tenants needn’t take any more time than you currently spend.
Buy Below Market Value
It’s been said before that the smartest investors make a profit when they buy, rather than when they sell.
Purchasing a property below market rate can not only help to provide near-instant equity in your new purchase, but can also keep mortgage payments down without affecting rental income. As a result, yields can be improved.
There are a number of routes to sourcing buy-to-let property below market rates. Firstly, auctions can provide an opportunity to pick up a bargain, though you’ll generally need to investigate specialist financing options for auction purchases.
A second option involves buying off-plan, or from an investment company who buys lots in bulk, in order to secure a discount. It is not unusual for buyers of such properties to save 10% or more off the market price of such properties.
Lastly, while they’re ever-harder to find, buying a property that is structurally sound but in a cosmetically-distressed state can be a smart move – assuming you have the time or capital to bring it up to scratch before renting it out.
Refinance (With Care)
The rental yield that landlords enjoy is largely a measure of the balance between your income and expenses. Of these, arguably the largest outgoing that any landlord needs to consider is their buy-to-let mortgage.
As a result, taking the time to regularly reassess your financial situation can be beneficial. After all, even just a modest reduction in your monthly mortgage payments can have a significant effect on the overall yield that such a property provides to you.
Be aware of forthcoming changes to the way in which BTL mortgages are calculated, which have the potential to reduce overall yields. Consequently, while refinancing can increase yields, it is important to carefully investigate all the options available before making a decision.
Boost The “Wow” Factor
While many of us like to think of ourselves as rational human beings, in control of our emotions, many of us have felt the warm glow of walking into a property that “feels just right”. Indeed, in a recent interview Kirsty Allsop claimed that after a property’s location she considered the most important factor to be “aspiration”. In short, how much of a “wow factor” does your property transmit?
Often something as simple as planting fresh flowers in the front garden, replacing doors or windows, or adding some stylish features can be enough to really make your property stand out to prospective tenants.
What’s more, the bigger the “wow factor”, the more likely it is that you’ll be able to inch up the monthly rent to effectively boost your yields.
Refurbish to Meet Current Demands
It’s no secret that certain refurbishments and improvements can impact the overall value of a property, while others have a negligible impact. If you’re keen to boost the rental you can charge – and hence your return – it therefore pays to focus on those improvements which appeal most.
Research by GoCompare suggests that practical aspects are currently winning over aesthetics in many cases. Prospective tenants are currently favouring properties with off-street parking, decent Internet connections and eco-credentials to keep utility bills under control.
More traditional improvements, such as re-installing period features or having an en-suite bathroom, are now ranked much further down the list of “must have” property features than in years gone by.