How to maximise your buy to let rental income
When you decide to purchase a buy to let property, you want to see the best possible return on your investment. If, like most landlords, your main concern is rental income rather than long term capital growth, a large part of this return undoubtedly involves how much rent you can achieve. However, maximising rental income is about more than just home improvements and hiking up the rent (although this can help!).
For the best return, you need to invest in the right property in the first place, make sure your agency has the expertise to find the right tenants for you and increase the perceived value of the space. Along with this, it’s paramount to minimise your risk of incurring additional (and unplanned) costs.
Here's our guide to maximising your buy to let rental income.
As a buy to let landlord, you have to understand the local market in order to maximise your income. Important questions to ask before purchasing a property are:
- Is there a high demand from tenants for this type of property in the area?
- Is the property likely to go up in value?
- Will the amount of rent you can achieve realistically cover all costs – and not just the mortgage payments?
- What is your projected yield, once you take into account all costs?
- Is there room for negotiation on the purchase price?
You can't underestimate the value of thoroughly doing your research so that you're aware of all the potential pitfalls, as well as the benefits. You should also have a target group of tenants in mind, as different social groups are likely to be prepared to pay more to live in different areas, near different amenities.
At Andrews, we can help you find your next investment property. We are happy to accompany you on viewings to give you an idea of projected rental values and share our knowledge of the tenant demand for that type of property in the area.
Read our 'Buy to Let Guide' for more information.
Find the right tenants
Once you've purchased the property, if you plan on using a letting agent, you need to get it professionally valued. Andrews offers a full market appraisal service. When you've established how much rent you can charge, the next step is to find tenants who will reliably pay that amount.
Finding the right tenant is an essential part of maximising your property's rental income – get it wrong and you could fall victim to fraud, rent dodging or long void periods. However, attracting the right people is time-consuming, particularly if you try to do it on your own.
Many landlords will hire an experienced agency, such as Andrews, to negotiate the process for them. We'll get the word out about your property to a huge variety of potential tenants and thoroughly reference check any applicants, using an independent agency with expertise in the field.
This will include a formal credit check using the prospective tenant's employer and previous landlord, providing you with maximum protection.
You can find out more about our services for landlords in this helpful guide.
Maximise Your Property's Perceived Value
Ensuring that your property is well-maintained and decorated to a high standard can make a marked difference to how much someone is prepared to pay for it. A well-maintained property can also help attract tenants who will look after it and maintain it well.
It's important to bear your target tenant in mind throughout this process, as different groups of people will have different requirements – for example, students may want an interior that's easy to maintain and keep clean, whereas young professionals are likely to want modern fittings and sleek finishes.
Some general guidelines include:
- Structural repairs – such as treating damp spots or fixing windows and doors.
- Thoroughly clean – every nook and cranny should be spotless. You should also professionally clean the carpets and pay attention to easy-to-miss areas such as the grouting between tiles.
- De-personalise – make sure the property is a blank canvas, so that prospective tenants can imagine what it would look like with their personal belongings in it. Remove things like unusual art and personal mementos.
- Re-decorating – you'd be surprised at the difference a lick of paint can make. Again, stick to neutral colours that will appeal to a wide variety of people.
- Think about the space – this ties into identifying your target market and is particularly important if you're furnishing the property. Consider how they're likely to use the space and how you can best make the property work for them.
For example, a group of students or young professionals are likely to want an open plan seating area for socialising, whereas young families might want the bedrooms not to be directly next to noisy areas like the lounge. See our 'What Tenants Want' guide.
Maximising the rental income of your buy to let investment is about more than just re-decorating. Ensuring that you buy the right property, in the right area, aimed at the right people is just as important. It’s also key to minimise risk to any unplanned costs, such as:
- Void periods - for every month a property remains empty, you lose 8.3% in revenue – which can be more than a whole year’s yield.
- Comply with a deposit law, failure to do so may result in a fine, three times the value of the deposit.
- Landlords found to have rented accommodation to irregular migrants without doing the checks could face fines up to £3,000 per person – and potentially criminal prosecution.
However, once you've taken the plunge, tailoring the property to suit your target tenants, re-decorating and carrying out structural maintenance can make a big difference to how much people are prepared to pay.