Model house being handed from one person to another, symbolising the rental agreement between a landlord and tenant.
As a landlord, or if you're considering becoming one, it's essential to understand the concept of rental yield. But what exactly is rental yield, and why is it important for landlords in Coombe and West Wimbledon?
In simple terms, rental yield measures the return on your investment. It consists of two key types: gross yield and net yield. Each provides valuable insights but accounts for different factors in your rental income.
Let’s say you rent out a two-bedroom property in South West London for £850pcm. As an example, if you originally purchased the property for £150,000 and you divide the annual rent (£10,200) by the amount you invested (£150,000) and times it by 100, you get a percentage, and that’s the gross yield. In this case 6.8%.
Gross yield is a fairly basic figure but it gives you a good idea about what you’re getting back. However, there is also net yield. This is similar to gross, but you also take into account the additional costs you incur as a landlord, such as insurance, maintenance, solicitors, agents, mortgage, and so on.
This net yield is helpful because you can look at exactly how much it costs you to be a landlord and shows you where you could reduce costs to increase your yield. Deciding what a good yield is might be different, but anything above about six or seven per cent is good. Our team are adept at helping people make the most of being a landlord, and we have come up with a list of five ways landlords can increase their rental yield.
1. Review Rent Regularly
At the appropriate time, look at the rental income on a property – can it be raised to be more in line with the going rate? Make sure you keep within your contractual agreements though and remember that while a rental increase may be right for you, if a tenant has been with you for many years and has caused you no issues, do you want to upset the applecart?
2. Review Your Outgoings
Let’s look at what you are spending on your property. Do you automatically renew your insurance, or is there a more competitive alternative on the market? If you use a plumber, are their costs expensive, or can someone do the same job for a lower price? Keep on top of your outgoings, and set reminders to look at alternatives when the time comes. Being a landlord is a business, so treat it as such.
3. Check Your Mortgage Renewal
You may have a buy-to-let mortgage for your property, but is it still the right one? Many different products are being brought to market, so when you’ve come to an appropriate point in your mortgage agreement, have a look around.
Always be mindful about switching. Keep an eye on the media for different products and even though it might not be the right time immediately, make a note so that you can go back to it when you are ready.
4. Invest Wisely
When you are thinking about becoming a landlord, do your homework. Look at where to spend your money, but also at the type of property. Do you want a newer property with less maintenance, or do you want an older place with the risk more could go wrong?
If you have a plan and it works, don’t deviate. If you have a good yield because you’ve got a newer home, stick with the idea when looking at another buy to let.
5. Be a Better Landlord
You’re more likely to get a better yield if you have a great property and great tenants (and yes, both can be achievable). But, can you be a better landlord?
Do you add quality fittings?
Do you respond quickly to issues?
Do you get things fixed promptly?
By being a great landlord, you’re more likely to attract great tenants and be able to justify higher rents. You assess a house and a tenant, why not assess yourself and see how you could be a better landlord. It makes business sense.
Having the right tenant in your property is more likely to help with yields. If they look after the house, your costs are likely to be lower. Of course, for total efficiency, we suggest you consider using a lettings agent to help manage your property portfolio. A full expert property management service will help you make the most of being a landlord.
If you need advice about becoming a landlord, or if you are a landlord and need some support, call us on 0208 947 9393 or email enquiries@coomberesidential.com to chat with a member of our friendly and experienced team.