No matter your experience in the property industry, whether you’re buying your first property or have an established portfolio, you want to make sure you’re maximising your rental yield from your investments.
However, it is not that easy in real life. Not all properties offer the same rental yield, which means some properties might not generate the returns you’re hoping for.
It is essential you understand what rental yield is and how to calculate it. You should also know the benchmarks you should be aiming for and make informed decisions on where to invest and what you can do to raise the rent.
In this article, we take a look at what is rental yield, how to calculate it and 8 tips for landlords looking to maximise rental yield.
What Is A Rental Yield?
Rental yield refers to the annual financial return a landlord can expect to achieve from renting out a property. It’s expressed as a percentage and is calculated by dividing the annual rental income by the property’s current value and multiplying it by 100. The higher the percentage, the better the return on investment.
Along with capital, rental yield is another important factor you can consider when assessing whether a property is a good investment. For high rental yields, a property should be in good shape and located in an affordable area with high demand and reasonable average rent prices.
8 Ways A Landlord Can Maximise Their Rental Yield
1. Be Flexible
Flexibility is a trait highly valued by tenants. From allowing minor aesthetic alterations to allowing pets, remaining open to tenants helps maximise rental yield in the long run. Moreover, not many rental properties allow pets, which gives you another easy way to maximise your rental yield!
2. Remain Up To Date With Safety Regulations
Part of being a responsible landlord includes keeping up to date with current safety regulations. Good maintenance of your rental property results in long-term tenancies and increased interest from renters. Here are some responsibilities landlords should take note of:
- As a landlord, you must ensure all gas equipment is installed and maintained by a registered engineer.
- Any electrical system or appliance within your property must be safe to use. By law, you must see to it that the general electrical system and electrical appliances you provide, such as cookers, kettles, toasters, washing machines, and more, are well-maintained.
- Landlords must strictly adhere to fire safety regulations of their property for the safety of their tenants. Smoke alarms must be installed and be in working order on the starting date of each new tenancy.
3. Provide Quality Furnishings
Similar to home décor, most tenants prefer homes with quality furnishings. Properties with matching, good quality furniture not only command a higher monthly rent and attract more tenants but are also more likely to be carefully looked after by the tenant, minimising wear and tear during their tenancy.
4. Hire An Experienced Property Manager
For a landlord to maximise rental yield, a property manager can be an invaluable member to them. Property managers are experts in handling the operations, maintenance, and administration of property rentals. Their work, among many other tasks, includes:
- Finding, screening and selecting tenants.
- Ensuring your property obtains the highest possible rent.
- Minimising vacancies.
- Maintaining the property and organising repairs where necessary.
- Reviewing and negotiating rental increases.
- Collecting the rent and providing you with rental statements.
- Handling routine property inspections.
- Handling any tenant complaints or issues.
5. Make The Right Refurbishments
If a large-scale renovation project is not possible or is financially out of reach, redecoration is a budget-friendly way to maximise rental yield.
When decorating a property, choose neutral shades for walls and flooring to appeal to as many potential tenants as possible. Furthermore, not only can a newly decorated property command a higher rent, but it also means tenants are more likely to take better care of your property and stay longer.
Landlords can also consider other factors, such as the rise in remote working. Ensuring that your property has high-speed internet access and a dedicated space for working could increase your rental yield significantly.
Another thing to consider is making a property eco-friendly. It can attract tenants who are environmentally conscious, differentiate you from your competitors and justify a higher rental charge.
6. Re-Evaluate Your Rent
Increasing your rent is the most obvious way to maximise rental yield, but it is not an easy decision to make. You must justify the increase based on the local market or changes made to your property and do so without dissuading your current or future tenants.
You could consult a letting agent to assess whether you’re charging more or less than the standard rate in your local area. This will determine if you’re charging too much (you could be deterring good tenants) or too little (you could be missing out on rental income).
It’s also a good idea to be aware of the latest developments in your area. Developments such as new schools or better transportation systems can drive up market prices.
7. Add Storage Space
In most cases, tenants moving into a rental property will have to limit the possessions they can bring. Storage space can be hard to come by, particularly in smaller apartments and share houses, but they remain a valuable asset to have.
Evaluate your property and consider how you can maximise it with shelving and cabinets, and get creative with organisers. Built-in or sliding-door wardrobes are also a good option for making a space feel bigger, while bicycle storage space could be a deal-breaker for those without a car.
8. Consider Developing Areas
Although it can be tempting to opt for a property in a well-established area, inflated values and a competitive market mean that these properties will generate a lower rental yield.
It is best to research upcoming regions where property values are not as high, but still in demand by tenants, gathering information to maximise rental yield.
Maximise Your Rental Yield With Rumah-i
For landlords looking to maximise rental yield, Rumah-i is a property management company you can trust. Our housekeeping, laundry, repair and maintenance, makeover and mover services provide your tenants with a comprehensive service guaranteed to give returns. Moreover, our experienced team has a strong background in the property industry. Thus, we provide professional and practical strategies to improve your property value and maximise its potential.