Find out more about Edinburgh property investment and our Property Investment Service.
Why does increasing property value affect 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. If the property is high value to begin with, then it must be able to command a comparatively high rental income to make the investment viable.
Find out how to calculate gross and net rental yield in our recent blog post.
5 Top 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 may 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, and may be out of reach for some investors. Focusing the search instead on upcoming areas, where property values are not as high but there is still tenant demand, will mean scope to achieve a higher rental yield.
In Edinburgh, the city centre can be very expensive, especially when looking at traditional style properties in the New Town for example. Although these properties will rent well, high property values will mean that the yield is relatively low even when a premium rent is achieved.
Property investors may instead consider opportunities in areas with ongoing regeneration, 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
All tenants look for a property that meets their individual needs, and for their ideal property they are willing to pay rent at the top end of their budget. Landlords should carefully consider the type of tenant that they are aiming to rent to, before investing in a particular property or area, in order to maximise their potential rental income.
Investors who want to rent to young professionals, for example, should aim to achieve a high spec property with good transport links into the city centre and possibly 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 the rental yield of a property is through renovation. Although it can be a large undertaking for investors, renovation can add value to the property and 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 combined living and kitchen area. These types of properties, when finished to a high standard, often attract young professional sharers and so can 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 up into attic space. These can be big projects but provide 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 top market rates for.
4. Freshen up décor
If a large scale renovation project is not possible, or out of reach financially, redecoration is a budget friendly way to add value to a property. In Edinburgh there is a lack of quality rental properties available so those that are newly decorated are always popular with tenants. When decorating a buy to let property, investors should always choose neutral shades for walls and flooring to appeal to as many potential tenants as possible.
Not only does a freshly decorated property command a higher monthly rent, it also means that a tenant is more likely to look after a property and stay there for longer. At Clan Gordon, we aim to increase the standard of properties in the private rented sector in Edinburgh. A rental property is a tenants home, so it should always be rented in good decorative order and we only work with landlords who are willing to achieve 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 out 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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