5 ways to increase the rental value of your property
by Rizwan Osman on 30th November 2020
If you’re a buy-to-let landlord, you want your property to be a profitable investment. The rent your property achieves will, in many ways, be dictated the average rents in your area as well as supply and demand. However, there are ways to maximise your rent and cut outgoings.
Here is some straightforward advice on how to increase the rental value of your property.
What is Rental Yield?
Rental yield is the annual rental income as a percentage of the property purchase price. Buy-to-let investors use it to work out the level of return an investment property delivers.
Calculate rental yield using this formula:
Rental yield = ((Annual rental income – Annual running costs) ÷ Property purchase costs) x 100
Take the total rent received over a year and subtract your annual running costs, such as mortgage interest payments, maintenance and letting agency fees.
Divide this by the cost you incurred purchasing the property. This would include the deposit you put down (or the total price of the property if you paid in cash) plus the purchase costs – stamp duty, survey costs, solicitors fees, mortgage arrangement fees and furniture and white goods are just a few examples.
Multiple the result by 100 to express as a percentage.
5 ways to maximise your rental value
The maximum rental yield is achieved when the annual rental income is as high as possible. The rental value is reduced if the property earns low rents or lies empty for several weeks. The following actions will allow landlord to charge maximum rents and encourage tenants to stay longer.
1. Make the basics better than basic
Rental properties have a reputation for being less than lovely. That may have been fine in the days when tenants stayed for only a short time, but these days tenants tend to stay in a property for around two years and so expect more. As such, one of the cheapest ways to raise rental income is for landlords to make sure their properties are well maintained. A fresh coat of paint in a neutral colour scheme, durable rather than basic furniture, a modern and efficient heating system and making the most of any outdoor space will pay dividends in terms of attracting and maintaining tenancies.
Landlords must also maintain their properties well during a tenancy. That means regular inspections and rapid responses when tenants point out problems. Being a good landlord is part of maximising rental value.
2. Focus on the kitchen and bathroom
Well-presented and carefully maintained kitchens and bathrooms attract new tenants willing to pay top rent and encourage them to stay, reducing re-letting costs and potential void periods in between tenancies.
Remember that kitchens and bathrooms in rental properties are likely to become shabby and tired more quickly than other rooms and that refurbishment or replacement will be needed far more often than in a private home.
The money it costs will be money well spent, because keeping these rooms in tip-top condition is key to optimising rental value.
3. Add another bedroom
Adding an extra bedroom is a guaranteed way to boost rental yield. Consider adding a loft extension to create an additional bedroom or if your property has a large living space turning one room into a bedroom could increase your rents.
Not only will adding an extra bedroom boost rental income, but should also raise the overall property value.
4. Target niche markets
Careful research into the local rental market may reveal niche groups of tenants who will be prepared to pay extra for the facilities they need or want.
One of the most easily accommodated niche groups are pet owners. Most dog and cat owners will happily pay a higher rent for the privilege of being able to bring their pet. Of course, some landlords believe pets can cause damage and cost more in repairs and cleaning than they would generate in extra revenue. We recommend that landlords consider letting to tenants with pets, read more about this in our recent article ‘Should tenants be allowed to keep pets’.
Some areas have tenants looking for multi-generational living and are willing to pay more for it so adding a ‘granny annexe’ may be profitable.
The corporate market can be lucrative. Corporate tenants demand properties fitted out to the highest standard so costs can be higher, but the rents are very high and can be collected up to a year in advance.
5. Offer added extras
You can also increase your rental value by offering something over and above your competition.
For example, if parking is at a premium in your area, you could add a private driveway. At the moment, home-working is a must, so installing fibre-optic broadband could help increase your rental value. State of the art appliances or security systems may attract tenants willing to pay more.
We suggest you check your investment will deliver enough additional rent to cover the higher costs and that tenants are willing to pay more to rent your property type in the area it’s located.
Credential have been established in the Tooting property market for over 25 years. We are experts in the local area and can help you maximise your properties rental value by achieving top rents and ensuring a smooth transition between tenancies, thus avoiding extended void periods. Get in touch, and we will help you to get the most from your rental properties.