The UK’s buy-to-let market is a popular choice for those looking to generate an income from real estate. However not all landlords are getting the most out of their investment property.
Experience Invest has provided 5 ways to improve your rental returns.
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Invest with Cash
Although this might not be an option for all investors, those who can afford to should consider investing with cash.
With no mortgage interest repayments, landlords could potentially start earning a profit from day one. Furthermore with no interest to pay the retail yields can be higher.
Cash investors can purchase properties off plan which tend to have discounts or below market value / comparable offers meaning they can secure capital growth potential.
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Calculate Your Costs
Consider all of your costs before purchasing your property. For example, factor in stamp duty fees, solicitor fees, land registry fees and bank fees.
If you are purchasing a leasehold apartment within a development, make sure you know how much the ground rent and management fees will be each year.
Ensure that you appoint an experienced solicitor as they will be able to advise you on your purchase.
Understanding your financial obligations upfront will help you determine whether your property is a good purchase for strong rental returns.
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Invest in a New Build
According to a HSBC report, landlords are able to secure rental returns 1% higher on new, modern properties.
Some off plan developments, like purpose-built student accommodation for example, may provide a slightly lower entry level onto the UK’s property market and could help landlords achieve slightly higher returns. Also as the property will be delivered brand new, investors will not have to consider repairs or renovation costs.
If your investment property requires renovations, remember to not go overboard. Simple, clean and modern designs will work well in the rental market and will not eat away at your profits. Remember; you do not have to live there!
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Think Outside the Box
You don’t have to purchase a property in your local area. Investors who do their research and purchase property in some of the UK’s buy-to-let hotspots such as Manchester, Leeds and Liverpool could be able to secure higher than average yields.
Don’t worry too much about managing a property which is miles away from your home. Simply appoint an experienced and professional management company to look after the property for you and you will still be able to benefit from the returns, without having to deal with the day-to-day maintenance or management of the property.
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A Less Traditional Route
The UK’s property market is changing. According to Jones Lang LaSalle, ‘alternative investments’ will take up 30% of all property transactions by 2019. 90% of those who were surveyed plan to ‘dip their toes’ into alternative UK markets.
Some lower entry asset classes such as purpose built student property, care homes and commercial offices will also enable investors to purchase a unit outright from around £50,000.
The nature of the alternative asset class enables investors to secure a higher rental return than more traditional options. For example, investors in the student property sector can command yields of between 8% and 10% NET per annum.
Assessing alternative options may help investors improve their rental returns.
