Redstones Lettings

Maximising rental yield as a landlord

Landlords are naturally interested in turning buy-to-let investing into a profitable endeavour. So, in spite of higher Stamp Duty being introduced for second homes, how can you ensure that you become a successful landlord?

One key measure that will help you determine your success is rental yield. Essentially, rental yield is where you calculate the return on your investment or profit levels. To calculate rental yield, you need to calculate the upfront cost of buying the property and the cost of mortgage payments paid over 12 months, if you don’t own the property outright.

Calculate the rent you collect from tenants over 12 months and subtract your annual mortgage payments from the annual rent collected to work out a gross rental income. Then deduct all costs, including insurance, repairs and void periods from this figure to calculate a net rental income. A net rental yield is simply a percentage figure. Take net rental income and divide it by the initial investment figure, before multiplying by 100.

Calculating rental yield is a way of determining the quality of your investment. Capital growth over time and a strong rental yield (over 6% is considered as very good) represents a great investment.

Want to maximise your rental yield even further? Try our tips:

Increase or decrease rent – Increasing rental amounts is possible if your rent is set below the market rate and decreasing the rent can help you avoid void periods, if this is a concern.

Utilise tax reliefs – Although rental income is taxable, you can offset several costs such as letting agent fees, buildings and contents insurance, council tax, utility bills and maintenance costs. Not all tax reliefs will remain available for long however. From April 2016, the 10% wear and tear allowance will be scrapped.

Welcome pets – Not all rented homes allow pets, so tenants may be willing to pay more if your property welcomes them.

Modernise the property A decent kitchen and bathroom attracts a better calibre of tenant and means you can charge more rent.

Decrease overheads – Look at ways to cut costs, from remortgaging to finding cheaper tradesmen for property maintenance.

Discover more about how Redstone help landlords attract tenants and achieve the best price for their properties.