Five tips to achieve a higher rental return
A good rental return? Heard that saying ‘you get what you pay for’? So if you are expecting me to give you five tips on increasing your rental return without doing anything to your property – you are going to be very disappointed. Sorry!
The rental market has changed dramatically over the last 18 months with a lack of supply and increasing demand. But that demand is always for the right sort of property.
First tip
Know the market your property attracts and who you want to attract.
Realistically this is one of the first things that you need to consider when you are looking to buy a rental property. I have seen many people get it so far off the mark it has been quite scary.
Case study
Several years ago I met with a couple who had bought a studio flat in Godmanchester – they got it at a bargain price – or so they had been told. Their expectation was quite specific and unfortunately the estate agent who sold it to them did not do anything to disagree with them. They were expecting that the apartment would attract a doctor or solicitor, who would only need to live there from Monday to Friday. Problem with that is that they had been sold a bit of a pup. The reason being the studio apartment was situated in block that took mainly homeless people with a drug issue. Not the best environment for anyone to live in regardless of profession (particularly the homeless people that lived there). Therefore, the expected return the couple were hoping for was way off the mark.
However, you can still achieve and average 4 – 5% return in the area. We have recently introduced a landlord to a property that will achieve a 6.3% return, but they are few and far between.
A family will be looking for larger bedrooms with lots of sockets, schools, amenities and somewhere to park up to two cars. Someone who works on the biomedical campus in Cambridge is looking for good links to Cambridge, have great coffee and restaurants within walking distance from home. Matched with the best wi-fi connection they can get they will start with a budget; those involved will be happy to increase that budget for the things they want.
Second tip
How do I make sure my property sticks out from the competition?
An obvious one is the decoration – magnolia interiors are definitely a no no. Always provide a home with a neutral palate.
Having great broadband is a definite plus.
Have an electric vehicle charging point – Aviva have just reported that 22% of people looking to buy a home have put this as a demand they are now looking for – the focus is very much on green fixtures and fittings. So why should it be any different for people looking to rent a home?
You can now apply for grants to contribute towards the cost of installing electric vehicle chargers. Initially you need to register, and the grant is given per charge point socket installed. The grant will provide up to 75% of the cost towards the purchase and installation of a socket, limited to £350 per grant. The only proviso is that installers must be approved by the Office for Zero Emission Vehicles, which is providing the grants. You need to be the registered at Companies House to apply but if you are not a limited company, your agent will be able to apply for you.
Have a good EPC – The same Aviva report said that 17% of buyers now have heat pumps on the list of demands. By 2025 it is believed that all new tenancies will only be granted if the EPC is C or above. From the 1st April 2022 grants of up to £5000 are available for the installation of a heat pump.
Third tip
Expand into the garden – perfect result for flexible working
If anything, this became the issue that needed to be fixed for so many people during the pandemic. Due to the various lockdowns and the acceptance that working from home has now become the norm, space for living and working at home heightened the demand for three bedroom homes. We saw a move away from studio apartments!
The third bedroom became the new home office. This matched with the availability of good broadband was a benefit that we made sure was highlighted in any marketing material. Where these were in place, we saw an increase of £100 per month in the average rental value.
Another consideration is to build an outside office in the garden if space allows. Again, the main thing you need to be aware of is the availability of good broadband- just make sure the connection can reach the office.
Fourth tip
Be flexible
They say that the UK is a nation of pet lovers and the number of pet owners over the pandemic has reached an all time high. So it constantly surprises me that a majority of landlords we work with strongly dislike allowing pets into their properties. However, I do understand if you have been bitten (pardon the pun) by a dog that has peed on the carpet and you were left with the cost of replacing the carpet .
Since the tenant fee ban, it is unlawful to take an additional ‘pet deposit’. Therefore, the only insurance you have is to charge extra for the rental. Most people understand this, given the lack of available pet friendly properties. You just need to make sure that you show this cost in any advertising. But the best insurance is to make sure that your prospective tenant is a good pet owner. Spoiler alert – there are no bad pets just bad owners! Asking for microchip details and a reference from their vet is a good start.
Fifth tip
Use a great agent
A great agent will have an ongoing list of applicants and know what they will pay more for. The marketing will attract the right sort of people with beautiful photos and 360 virtual tours and a great agent will be pointing out the benefits of the area rather than just explaining that there is a kitchen in the house! A great agent will listen to you and your tenant to find the best match so that everyone feels they have a win win…well that is what the team at Maxine Lester do!
