How to Maximise Your Rental Yield

Lucas Fox’s guide to maximising your rental yield so you can get the most profit from your property.

What is Rental Yield?

Rental yield is a measure of the return on a property investment. Gross rental yield is calculated by dividing the yearly rent by the purchase price.

The aim of any investor is to get a great deal on a property and achieve the highest rents. This might sound easy but it’s easier said than done, and there are many factors to consider in order to maximise your rental yield.

Here are a few key pieces of advice:

Research Rent Levels

Always have a look at rental prices in your chosen area to get an accurate picture of the market. Remember to focus on what tenants are actually paying as well as advertised rents which may be negotiated downwards. Also, see if you can get a picture of how rents have changed in recent years. Once you have purchased your property, that is a fixed number, but rentals can go up and down and this will affect your annual yield.

Research Property Prices

Great properties in sought-after locations will generally cost more to buy, but in the same way they command higher rents. The trick is to find a property that is still good value, but is likely to become more desirable for tenants in the future. Remember, the purchase price is a fixed number, but rents can go up and down. If the property’s desirability goes up, then people will be prepared to pay more rent and your rental yield also goes up. See if you can find out about plans for local development, or pedestrianisation, new parks, schools or even a new rail, metro or tram station. Of course, driving a hard bargain for the best purchase price is also an advantage.

Get Good Advice

Ask the professionals about the market and choose an agent with an excellent track record in achieving the best rents.

Remember that your individual financial circumstances will affect your annual expenses. For example, have a clear idea of how much tax you will have to pay on your rental income as this can be a large part of the annual costs associated with being a landlord.

Make sure you have the best mortgage to suit your circumstances and financial goals, whether it’s a fixed rate for a fixed period, which may cost more but offers peace of mind, or a cheaper but more volatile variable deal.

Have all legal documents drafted professionally and make sure they include clauses that cover areas such as rent reviews, pets and all responsibilities on both sides. This can save a lot of time, trouble and expense in the longer term.

Be Prepared

The market can go up as well as down, so make sure you have a realistic idea of what you can afford. Build in some contingency for months when you may not be able to find tenants, or when you need to make repairs or renovations. Look into insurance to cover yourself for longer periods without rental income. This will add to your annual expenses, but may save you more trouble in the long run.

Choose the Right Tenants

A little more work in finding tenants can pay off in the long run. Take time to get proper references and find out whether your potential tenants are planning to rent for a short period or long-term. Choose the right places to advertise, and ask an agent about their track record in finding good tenants.

Look After Your Tenants

Happy tenants are more likely to continue renting your property, and ongoing tenancies are great for maximising your rental yield. Always respond quickly when they contact you, have a realistic discussion about any concerns they might have, and be human. You may have to pay a bit more on maintenance and upkeep, but they are more likely to look after your property well, and you won’t have to pay for empty months between rentals.

Review and Revisit

Always keep track of rents around your property and review your own at the end of each rental period. This is easier to address if you have a clause in the rental agreement. Also keep track of your mortgage deal and look into current deals that might be better for you. The mortgage market can be very volatile, so it’s always worth looking to see what’s available.

Add Appeal to Your Property

Buying in the best location you can afford will clearly help you to achieve higher rent levels, but you can also do a lot to add appeal to your property with a few easy ideas that don’t have to cost too much and will soon pay you back in higher rent and happier tenants. Freshen up paintwork, make it feel light and airy, ensure there is plenty of storage, add a sense of security with good locks and a solid front door, add a few plants or window boxes and ensure everything works. It may be worth spending a little more on kitchen equipment, for example, and a feature fridge can be very persuasive to future tenants!

Ensure Good Management

Be realistic about your ability to handle the ongoing requirements of looking after a rental property. Speak to an experienced rental agent about taking care of this for you. This may increase your expenses, but it will ensure that tenants are looked after and will take away the ongoing burden of looking after your property.

Use Changeover Time Wisely

If you have a change of tenants then ideally you will have the new ones moving in at the same time as the old ones leave. If this isn’t possible then use any empty time to decorate and refresh the property. This minimises the disruption of carrying out maintenance while tenants are living there. Also, if you have yet to find new tenants then this might add appeal and enable you to achieve higher rents.

Better properties appeal to better tenants, so do all you can to make yours stand out. De-cluttering and giving the property a lick of paint can make all the difference! Ensure the furnishings are neutral and good quality. And when you get some interest make sure you fully reference all potential tenants.

Shirley Rhodes, Head of Rentals Lucas Fox

Here is a selection of properties currently for sale with Lucas Fox that offer an excellent potential rental yield:

New build 3-bedroom apartment for sale in La Xerea, Valencia

Ref: VAL9813
€600,000

Apartment
3 Bedrooms
Size 178m²
Potential Rental Yield 6.00%

Situated in an excellent location in the heart of the city, this beautifully renovated apartment boasts high quality finishes and fantastic views over the Turia Gardens, the largest urban garden in Spain. It also benefits from excellent communal facilities, including a gym and solarium, and private parking.

Renovated 2-bedroom duplex for sale in Poble Sec, Barcelona

Ref: BCN9281
€295,000
Apartment

2 Bedrooms
Size 70m²
Potential Rental Yield 6.10%

This 70m² duplex apartment is situated within a fully refurbished period building with a lift and a communal terrace on Carrer Margarit in Barcelona’s Poble Sec district. Fully renovated, it is ideal for anyone looking to rent out a new property immediately, without the need for renovation or decorating.

4-bedroom apartment for sale in a peaceful area of Gràcia, Barcelona

Ref: BCN9554
€400,000
Apartment
4 Bedrooms
Size 114m²
Potential Rental Yield 5.40%

This well presented 4-bedroom apartment is located in Barcelona’s charming Gràcia neighbourhood. The living-dining area is spacious with attractive parquet flooring whilst the kitchen is well equipped and has a breakfast bar for informal dining. The apartment provides an excellent investment opportunity.

Renovated 1-bedroom apartment with a terrace for sale in Eixample Right

Ref: BCN7609
€279,000
Apartment
1 Bedroom
Size 32m²
Potential Rental Yield 5.38%

This modern penthouse is located on the eighth floor of a building on Carrer Roger de Flor, next to the wonderful Ciutadella Park in Barcelona’s Eixample Right neighbourhood. Fully renovated in 2011, the apartment has been tastefully decorated and well designed to make the most of the reduced surface area. The apartment benefits from an air conditioning and heating system.

An exclusive luxury New Development in Almagro, Madrid

Ref: GMC19
From €1,650,000
New Development
2, 3 & 4 Bedrooms
Sizes from 197m²
Potential Rental Yield 4.73%

This superb New Development is located in an elegant early 20th Century building with a classic façade with elaborate decorative details. The building will be fully refurbished and will provide 27 luxury apartments and penthouses with outstanding communal services such as a fully equipped gym and spa, an indoor pool, a rooftop infinity pool, parking facilities and storage rooms.

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