Being a landlord can be a lucrative way of making money and whether you want extra
income or funds for retirement, having a buy to let portfolio can enable you to do this. Yet,
only if you have a good buy to let yield on your properties will you be able to make a profit
What is a buy to let yield?
A rental yield is the return on investment that you make on your buy to let properties. A
good rental yield is typically 7% and more. To work out the rental yield of your property,
you can use a rental yield calculator
Consider Hidden Costs
Online letting agency Howsy has found that landlords are having their buy to let profits
squeezed with hidden costs. On average landlords are left with only £2,140 from an annual
return of £13,000 due to stamp duty costs, letting agency fees and repair and maintenance
Consider buy to let hotspots
Firsty, it’s a good idea to think about where the buy to let hotspots are and where you want
to invest. Student towns typically have been good choices but due to Covid-19 there has
been a shift in previous buy to let hotspots. Due to an increase in working from home too,
there has been a sizable shift in tenants moving out of London and moving towards
Cambridge, Gloucester and Oxford. According to Rightmove,Cambridge alone has seen a
76% increase in property searches. Ultimately, consider investing in somewhere with good
transport links and access to good schools and amenities.
Rent v’s mortgage payments
A letting agency will help you decide what rent to charge for your property so you’re charging
the right rent. You don’t want voids because the rent is too high and similarly you don’t want
it to be too low as either way you’ll lose money. However, you’ll want your rental income to
be higher than your mortgage repayments. Shop around for the best buy to let mortgage
deals and don’t pay more than you need to. If you currently have a fixed rate mortgage you’ll
be able to plan and work out what you’re earning each month, consider this rather than a
Having a HMO property could maximize your income as you can rent out each room and this
can enable you to gain more of a profit. It may also be worth considering increasing the
amount of bedrooms so you can rent to more tenants. You may have an extra living room or
want to put up a partitioning wall to make more bedrooms. However, you’ll need to consider
getting a licence and the turnover could be higher so you need to consider any void periods
that could occur.
Furnished properties will have a higher rental income than unfurnished properties. You don’t
need to go all out and completely deck the whole house out but consider some key pieces. A
bedroom complete with bed and storage, a seating area and television in the living room
along with a dining table and some key white goods in the kitchen including a dishwasher,
washing machine and tumble dryer.
Higher spec properties will obtain a higher rental rate as they’ll be more appealing and have
more demand. When a tenant is viewing a property, they’ll want somewhere they can move
in straight away and make their own. Garish decor will put any prospective tenant off, so the
key is to use neutral colours throughout your home.
Kitchens and bathrooms are main focal points too for tenants. If you don’t have the budget
for a complete bathroom and kitchen refit, you can change the handles and fronts on your
kitchen doors or even paint the kitchen cupboards to give them a makeover. For the
bathroom, you can even just change some of the fixtures and fittings such as tired taps and
shower heads. Replacing tiles around the bath and sink can also give it a quick update.