Is your buy-to-let as profitable as it could be? Many aren’t.
There’s often more mileage in a rental home than many landlords realise, and some of the checks you can make to determine whether your property is a peak performer include:
- Can you reduce your expenses?
- Do your tenants usually leave after the initial contract term?
- Are other nearby homes achieving a higher rent than yours?
- Does your property reflect what local tenants are looking for?
Being a successful landlord is all about balancing capital growth, cash flow, and long-term planning. If you can optimise your investment now, it’ll work even better in the future as rental values increase.
With that in mind, this week’s blog is packed with tips for more profitable buy-to-lets, from cutting your costs to making improvements and even reviewing your business model.
So whether you’re thinking of becoming a landlord, have a rental property that will soon be empty, or want to negotiate a higher rent with your tenants in return for upgrades, all you need is right here.
CUT YOUR COSTS
One of the simplest ways to increase your profits with no cash investment is to reduce your outgoings, so take a look at the following areas for potential savings:
- Rather than auto-renewing buildings, contents, rent guarantee and public liability insurance, shop around for better deals and approach your existing providers for discounts.
- Paying down your buy-to-let mortgage early could give you greater long-term returns than leaving your money in a savings account.
- Agency fees – we’re biased here, but if you have the time and inclination to manage viewings, referencing, inventories, repairs, contractors, disputes and changing laws, you could go DIY.
The easiest way to get a handle on all your expenses, renewal dates and opportunities for savings is to create a spreadsheet in something like Excel to lay everything out in front of you.
INCREASE LUXURY, STYLE & COMFORT
The best tenants will happily pay more for well-designed, stylish and comfortable homes, so they’re a no-brainer if you want to maximise your income. Details that make a real difference include:
- Decorating with washable paint in fresh neutrals like warm white or soft stone, then cleaning the walls between tenancies and treating every room to a new coat at least every five years.
- Investing in your garden or balcony: outdoor space is in high demand and massively valuable, so grab some tips in our Blooming Rentals blog.
- Replacing old carpets and chipped laminate with engineered wood flooring, removing thresholds for a continuous sense of flow and modernity.
- Adding storage where it’s lacking, from a place to hide the ironing board and vacuum cleaner, to a medicine cabinet or vanity unit in the bathroom, to fitted wardrobes in tight bedrooms.
- Providing an excellent shower fitting with thermostatic controls and decent water pressure for an invigorating start to the day – ditch the dribbling hose!
Ultimately, the most successful rentals are consciously designed to attract high-quality tenants and keep them for the long-term, rather than being done on the cheap and full of tiny annoyances.
IMPROVE ENERGY EFFICIENCY
Regardless of whatever future laws are passed around minimum EPC ratings for rental property, higher utility bills are with us now, which makes energy-efficient homes a big deal for tenants.
- Cheap and instantly effective measures are flow restrictors on taps, and draught-proofing around window frames, doorways, letterboxes and keyholes.
- Replace outdated energy-guzzling appliances, particularly old ovens, fridges and boilers, with A+ rated models from well-respected brands like AEG, Bosch, Neff and Siemens.
- Add thermostats to radiators so your tenants can choose which rooms to heat, rather than having the heating on full-blast everywhere, or sitting around in the cold to save cash.
It’s also worth remembering that improved energy efficiency will lift the sales value of your property, giving you more options in the future, whether that’s selling up or refinancing to expand your portfolio.
BUY A FIXER-UPPER
A proven buy-to-let formula takes a property that needs renovating and then adds value by unlocking its full potential. Some of the areas you could look at when carrying out major works include:
- Finding a way to gain an extra bedroom, perhaps by merging a separate kitchen and living room, converting a loft or garage, or adding an extension.
- Upgrading dated kitchens and bathrooms with shiny new fittings, sleek contemporary comforts and premium taps to dazzle potential tenants and future buyers.
- Improving insulation in walls, ceilings and floors, and replacing leaky old windows with modern double-glazed units that match the original style.
- Stripping off outdated wallpaper and giving walls a fresh new skim of smooth plaster.
If you’re looking to renovate a rental property, talk to us before you start for a chat about what local tenants are looking for, and take a look at our Buy, Revamp, Rent, Repeat blog for expert tips.
Sometimes, the way to greater and sustainable profits is to find another angle for your buy-to-let business model, and possible new directions to explore include:
- Setting up a company to buy future rental homes could open up lower taxes, higher mortgage relief and easier inheritance planning around passing assets on to family.
- Converting your existing rental properties into HMOs (Homes of Multiple Occupation) or Holiday Lets, but check any local restrictions, permits and planning regulations first.
- If you own an entire house, dividing it into two or more self-contained apartments could give you access to a different audience and extra income.
Finally, switching letting agents can transform the management and performance of your rental property, and you’ll find lots of tips on choosing a new letting agent in our TOO MANY TENANTS: How do you pick the best of the best for your rental property? blog.
What’s your next step?
If you have a property to rent and you’d like to turn it into a magnet for the best tenants in town, why not get in touch?