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Property value vs rental yield
The rental yield is the annual return on investment that a landlord will make on a buy to let property, calculated by dividing the annual rental income by the value of the property and expressing the figure as a percentage. A high-value property must command a comparatively high rent to make the investment viable.
Property Investment Advice
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5 Tips to Increase Rental Yield
Contact us if you are looking at buy to let options in Edinburgh, we are happy to look at details and provide property specific advice.
1. Consider upcoming areas
Although it can be tempting to opt for a property in a well-established area of town, inflated values and a competitive market mean that these properties will generate a lower rental yield. Focusing your search on upcoming areas, where property values are not as high but there is still tenant demand, will give scope to achieve a higher rental yield.
In Edinburgh, the city centre can be very expensive, especially when looking at traditional style properties in (for example) the New Town. Although these properties are almost guaranteed to rent well, high property values mean that the yield is relatively low, even if a premium rent is achieved.
Instead, considering opportunities in areas with ongoing regeneration may help to achieve a higher rental yield. There are excellent investment opportunities available in areas such as Leith, where property values are still relatively low, but tenant demand is increasing due to improved local amenities and affordable rents compared to some other parts of town.
2. Cater to your future tenants
Tenants look for properties that meet their specific needs; for their ideal property, most are willing to pay rent at the top end of their budget. Before buying an investment property, you should carefully consider the type of tenant you are aiming to rent to, and tailor your choice to meet their needs. This will help to maximise your rental income.
For example, if you are planning to rent to young professionals, you should aim to provide a high spec property, with good transport links to the city centre and parking. Similarly, outside space, close proximity to schools and a dishwasher could be more valuable to families looking to rent their next home.
3. Consider properties in need of renovation
Another way to improve your rental yield is through renovation. Although it can be a significant project, renovation adds value and can increase the potential rental yield considerably.
One option for renovation would be to purchase a large one bedroom property, with a living room and dining kitchen, and convert this into a two bedroom property with open-plan living and kitchen area. These properties, when finished to a high standard, often attract young professional sharers and command a higher rent than a one bedroom property.
Other examples of adding value through additional bedrooms are moving the kitchen to an internal box room to create a bedroom, or building bedrooms into attic space. These can be big projects but provide a strong return on investment. Contact us to discuss project management of renovation projects.
More straightforward renovation works can include replacing tired bathrooms and kitchens. These are improvements that tenants appreciate and are more likely to pay higher rents for.
4. Freshen up décor
If a large scale renovation project is not possible, or is out of reach financially, redecoration is a budget-friendly way to add value to your property. There is a lack of quality rental properties in Edinburgh, so those that are freshly decorated are popular with tenants. When decorating a buy to let property, choose neutral shades for walls and flooring to appeal to as many potential tenants as possible.
Not only can a newly decorated property command a higher rent, but it also means tenants are more likely to look after the property and stay longer. At Clan Gordon, our aim is to improve the standard in the private rented sector. A rental property is a tenant's home, so should always be rented in good decorative order; we only work with landlords who are willing to provide this.
5. Provide quality furnishings
Similarly to décor, quality tenants expect quality furnishings. Properties with matching, good quality furniture not only command a higher monthly rent, but are also more likely to be looked after by the tenant, minimising wear and tear during the tenancy.
Providing quality furniture does not have to be expensive. IKEA now have premium ranges which can be collected and assembled by our Handyman.
Contact us if you are considering purchasing a buy to let property in Edinburgh and would like advice on maximising your rental yield. We regularly source investment opportunities for buy to let landlords through our Property Investment Service.
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