Are you getting the most from your rental income?
Whether you own a single buy-to-let or a huge portfolio of properties, you have probably wondered if you are getting the most from your investment.
If you believe the only way to maximise rental income on your property is through regular demands to raise the rent, it could be time to think again. There are many other ways to supercharge your investment’s potential, subject to whether you are already operating as a landlord or looking to buy a property in London.
Understanding the market
Before you start browsing for your ideal investment, you’ll need to decide on your target audience. A large house within easy traveling distance of a college or university rented as an HMO (House of Multiple Occupation) will attract the lucrative student market.
By contrast, a one-bedroom apartment in a central area such as Westminster would make an ideal pied-a-terre for a professional based out of town or even a permanent home for a downsizing couple. This would be a great prospect for a long-term rental, avoiding those costly void periods between tenants.
When you’ve decided on your ideal tenant type, a good letting agent will be able to guide you to areas – and even specific streets or apartment blocks – that prove popular with your chosen demographic.
Making the most of London’s rent revolution
If you are looking for a buy-to-let, careful research will help you identify the areas with growth potential or high rental demand (or, ideally, both).
Since the 1990s, London has experienced a minor rent revolution. The percentage of people renting, as opposed to owning, a home has increased by almost 13 per cent since 1991. The capital charges higher rents than anywhere else in the UK, and just last year private rents rose by 11.2 per cent on average.
Today, high mortgage costs- not to mention the circa £145,000 deposit required by mortgage lenders - have created big challenges for renters attempting to buy a home. Many frustrated first time buyers have abandoned their home-owning plans altogether and this has helped to drive up demand for rental properties.
While the rate of rent increases has now fallen back a little, industry experts expect that they will continue to rise. By 2028 property pundits predict that we will see a 6.7% increase across prime commuter zones and an increase of 18.2% for the rest of London.
Will we continue to see a buyer’s market?
London house prices have begun to rise again, but there is still a way to go before they return to the peak levels of 2022. The Office for Budget Responsibility (OBR) has predicted that it could take until 2027 before prices fully recover.
Currently, the capital’s homebuyers continue to benefit from a ‘buyer’s market’. This means they can enjoy more leverage and greater choice when buying a home. But if, as predicted, interest rates fall in June, the situation may change.
It is widely believed that the Bank of England will cut the base rate – which affects the cost of mortgages – by 1 per cent this summer. Such a move could result in more activity and greater competition, as buyers previously hindered by high interest rates decide to re-engage with the property market.
Homebuyers looking to negotiate a keen price could, therefore, find that now is a good time to secure their ideal home or investment. As always, our experienced London estate agents are ready to advise on the best locations for your home search.
Where to buy
Not all areas offer the same returns for landlords, so it is worth looking out for locations that offer reliable income with some potential for growth.
- Earlier this year, the Evening Standard reported that Southwark offered “the best value for money in the capital’s central zones” for property prices, making it a great area for investment. In March, the average monthly rent in Southwark was £2,194: a 9.3 per cent rise from the average of £2,007 recorded in March 2023.
- In the busy borough of Westminster, rents rose by 12.7 per cent over the year to an average of £2,950 per month.
- The central travel hub of London Bridge has seen rents rise by 4.7 per cent in the last 12 months, The average rent for a flat here is currently £2,293.
Maximising income on an existing rental property
Layout logic: take a look at your property’s floorplan and ask yourself if there’s potential to maximise space. Is the attic just gathering dust? If so, a loft conversion could really make a difference to your rental income. Is there room to extend at the back of the property? A two-storey extension could add more kitchen space plus a revenue-boosting extra bedroom.
Refresh and relaunch: tenants are more likely to agree to a higher rent if the property looks spotlessly clean and well kept. With a fresh coat of paint, some new carpets and updated kitchen and bathroom spaces, you could have renters queuing round the block to view.
Tempt them with tech: renters appreciate properties equipped with devices and appliances that help to cut energy bills and save time. A 2022 survey by rent.com found that 82 per cent of renters wanted at least one smart device or system in their home.
Happy homes: 50 per cent of landlords responding to the government’s 2021 English Private Landlord Survey reported that they often cut rent prices in order to avoid long void periods. Most tenants appreciate a speedy response when something goes wrong. If issues with a property are not resolved within a reasonable timeframe, your tenants may quit, leaving the property unoccupied until a replacement can be found. To keep tenants happy, consider using a property management service to whom tenants can report emergencies 24/7.
Where can I get reliable advice?
As an award-winning lettings agent with 30 years’ experience of working in the capital, we would be happy to advise. Whether you’re taking the first steps to acquire a buy to let or you are an experienced landlord, we can assist with every aspect of letting and property management.
Simply get in touch with our experienced lettings team, and we’ll do our best to help.