How to increase your rental yields

WHETHER YOU ARE thinking about making your first buy-to-let investment, or you are an experienced portfolio landlord, there is a lot that you need to consider when you let out a property. As with any investment, it’s important to understand how to maximise your returns and the rental yield is one of the key metrics that landlords should focus on.

WHAT IS RENTAL YIELD?
Rental yield is a measure of the annual return on investment from renting out a property. It’s calculated by taking the annual rental income and dividing it by the purchase price (or value) of the property. For example, if you bought a property for £100,000 and it achieved rental income of £5,000 per year, the gross rental yield would be 5%.

WHY IS RENTAL YIELD IMPORTANT?
Rental yield is an important metric for landlords as it allows you to compare the return on investment from different properties. A higher yielding property will generate more income relative to its purchase price and, therefore, may be a better investment.

HOW TO CALCULATE RENTAL YIELD
There are two main types of rental yield: gross yield and net yield. Gross yield is the simplest way of calculating rental yield. It’s simply the annual rental income divided by the purchase price (or value) of the property. As we saw in the example above, if you bought a property for £100,000 and it achieved rental income of £5,000 per year, the gross rental yield would be 5%.

Net rental yield is calculated using the price of the property, the income generated by the property and the associated costs and fees of owning a property. To calculate net yield, you simply deduct all of these costs from the annual rental income and then divide by the purchase price (or value) of the property. For example, if your annual rental income was £5,000 and your total annual costs were £1,500, the net rental yield would be 3%.

HERE ARE OUR TOP 5 TIPS FOR BOOSTING YOUR RENTAL YIELD
There are a number of things that you can do as a landlord to boost your rental yields. Here are some of the most effective strategies:

1. REVIEW YOUR MORTGAGE DEAL
It’s important to make sure that you’re on the best possible mortgage deal. Even a small difference in the interest rate can make a big difference to your bottom line, save you money on monthly repayments and free-up equity for further investments.

2. INCREASE RENT GRADUALLY
Another effective way to boost your rental yields is to increase rent gradually over time. By doing this, you can keep your property competitively priced relative to other properties in the market, while still achieving healthy rental growth.

3. ADD VALUE TO YOUR PROPERTY
Investing in improvements and upgrades to your property can also help to boost your rental yields. By adding value to your property, you’ll be able to charge more rent and achieve a higher return on investment. Some simple and cost-effective ways to add value to your property include: Decorating and redecorating – A fresh coat of paint can make a big difference to the appearance of a property and it’s relatively inexpensive to do.

Upgrading fixtures and fittings – Replacing old and outdated fixtures and fittings can also help to improve the appearance of a property.

Adding storage – Adding additional storage space, such as built-in wardrobes or loft conversions, can be a big selling point for tenants and can help to increase rental values.

4. REVIEW YOUR INSURANCE POLICY
Another cost that can eat into your rental income is insurance. It’s important to make sure that you’re adequately covered against risks, such as fire, theft and damage from tenants, but you don’t want to overspend on unnecessary cover.

Review your current policy and make sure that you’re getting the best possible deal. You may also want to consider taking out landlord insurance, which can offer additional protection.

5. BE EFFICIENT WITH YOUR COSTS
There are a number of other costs associated with being a landlord, such as maintenance and repair costs, marketing expenses, etc. It’s important to be as efficient as possible with these costs in order to maximise your rental income. For example, rather than carrying out all repairs and maintenance yourself, you may want to consider using a property management company. This can help to save you time and money in the long run.

By following our tips, you could boost your rental yields and achieve a higher return on investment from your buy-to-let property portfolio.

Don’t forget, our professional, friendly advisers are on hand to support you and can help you explore all of your options.