Landlords can improve yield by investing in York property
A crucial and yet often overlooked aspect for property investors is to decide on which areas are the best for their investment. Over the long term, York property makes a better prospect because property prices will increase more strongly than in other areas.
One of the secrets for property investing success is to boost yield and returns to above average market levels to make the whole experience so much more rewarding.
There’s no doubt that by buy to let property investment is growing in popularity with high demand from tenants and continuously rising rents making the sector a potentially lucrative one.
However, landlords and potential landlords alike need to keep an eye on their costs which will have a direct impact on their yield and returns.
Boost property yield the easy way
Research is key to successful property investment which may mean that you don’t buy a property in your area and instead target those areas where people who rent property are wanting to live.
Indeed, it’s also important that you sit down and target a certain type of tenant. If it’s close to a university, then students are among the best tenants to have and this sector usually offers higher than average yields.
A student house should be easy to clean and be fairly comfortable whereas young professionals will be looking for a property that is more modern and a family will need somewhere they can bring their own belongings.
The second most important issue to contend with is to buy a property at below the current market rate.
Buying a York property for investment
This can be easier said than done but it’s not impossible and all investors should sit down with a pen and paper and calculate how much the house will cost and how much rent they are likely to receive.
This is because buy to let mortgage lenders usually want to see the rent cover 125% of the mortgage payment.
Many lenders are demanding a minimum of 25% deposit for a property investment and the better deals, interest rate wise, are generally for those investors who have more money to put down as a deposit.
Other issues that affect yield are void periods. This is where the property lays empty and no one is paying rent.
As a rough rule of thumb, all landlords should calculate their rent income on 11 months’ rent payments year – to receive all 12 months will inevitably boost the yield and return.
Again, the best way to avoid having an empty property is to buy somewhere where there is demand and people want to live in properties like yours.
It should also be noted that yields can be improved by getting a better mortgage deal than you currently have. It always pays to shop around and it might be worthwhile speaking with a specialist buy to let mortgage broker, also known as an intermediary, because they will search the entire market and find a deal that is most suitable for you and your needs.
How to work out a property’s return
There’s an easy way to work out the return on a buy to let investment and this figure should not be confused with the property’s yield.
Essentially, the investor should subtract their mortgage costs from their rent and then work this out as a percentage of the deposit they put down on the property.
So on a £75,000 mortgage with a 5% interest rate, with rent of £500 a month leaves a difference of £2,250. With the buying costs deposit equal to £27,000 the annual return is therefore 8.3%.
However, that isn’t the actual true figure since there are various maintenance costs, expenses and tax that will need to be deducted to give a truer figure.
How to calculate York property yield
Yield is calculated by taking the annual rent received and working out that as a percentage of the purchase price.
For example, on a property that costs £200,000, and delivers £10,000 of rent a year, it will have a 5% yield.
This means the best way to boost yield is to buy a property cheaply and rent it out at a good level of rent.
However, there are a number of other ways to boost yield, a landlord could for instance target a niche market or just add a few extras that will appeal to those who are willing to spend more in rent for these things.
Boost yield easily on a property
There’s no doubt that even the little things can make for a big difference to a property’s yield.
One of the best ways is to create more space – adding an extra bedroom for instance. Some landlords may find adding an extension is an excellent way to boost yield. Converting the loft into a bedroom or making the cellar into a bright living room will help.
If the landlord is struggling to finance conversions and additions then they should invest in improving the property’s interior. Invest in new carpets, kitchen units or a bathroom suite to make the property look modern and fresh. Even a lick of paint will help.
Many tenants are looking for white goods as standard so investing in fridges and freezers and ovens should pay dividends.
Landlords should also spend time on sprucing up their garden – an easy way to attract tenants.
Another good idea to boost the rent and the yield is to add ‘extras’ such as broadband Internet access and car parking, which could be a crucial issue in some cities.
It should also go without saying that a fully furnished property is worth more to someone who has no furniture than an unfurnished property.
This means a landlord could target people wanting a place to rent over the short term, professional people working in the UK for a few months for instance, or divorcees and young people who have recently left the family home.
Essentially, these people are usually of them willing to pay extra for the ease of moving into a home that is already fully furnished and doesn’t need anything adding to it.
An expert can help boost yield
Anyone considering buying a property as an investment and then renting it out should carry out extensive research and then consider using a letting agent to ensure that the property is run as effectively as possible.
A letting agent is an extra cost which will impact on the property’s return but for most investors this will be money well spent because the letting agent will be able to use their experience and expertise to deal with any problems that arise from the property.
Also, finding a tenant for your property can be a time-consuming and expensive business and viewings may take place in the evening or over a weekend. A letting agent can deal with all of this and then carry out the checks to ensure that the tenant is able to pay and look after the property as well.
For more information on how to boost the property’s yield, contact the experts at Redmove who are the leading letting agents for York property and there will be happy to deal with your query.
Contact Redmove now to learn more about how we can help landlords boost their yields and returns on 01904 488 444.
Redmove prides itself on being a lettings agent that is answerable to York’s landlords and to the industry’s leading organisations and so they conform to guidelines and codes of practice. Redmove are members of the Association of Residential Letting Agents (ARLA), the National Association of Estate Agents (NAEA) and The Property Ombudsman (TPO). The firm is also registered with the Trading Standards Institute (TSI). For any property investor or landlord in York, Redmove offers the best levels of experience and expertise and can be contacted on 01904 488 444 or visit their website to find out more.
Pic Stuart Miles, freedigitalphotos