It’s a tough time to be a landlord in the UK at the moment - especially when it comes to increasing your profit margins. So I’m exploring what can you do right now in an attempt to increase your profit in the property business. Here are just a few suggestions….
Increase the rent
Obvious I know, but review your tenancies and look for opportunities to increase your rents. You need to be careful with this as some areas won’t stand an increase - but for those that do it’s worth doing small increases periodically, especially when renewing or switching any tenancies.
Create an extra room
Do you have an integrated garage, loft, or other space to create an extra bedroom? Not only will an extra room increase your rent, but experts say adding an extra room could increase your property value by around 10 per cent. Don’t forget to check with your local planning department to determine if any consents are needed - and what building regulations might apply.
Add an ensuite onto any bedrooms
An ensuite bathroom will always make a property more appealing especially in a HMO (House of Multiple Occupation). This will reduce voids and provide the opportunity to charge a higher rent.
Redecorate to a high standard and make a major improvement such as a new bathroom or kitchen
Tenants are willing to take a higher than normal rental increase if you make significant improvements to the property. Upgrading a kitchen or bathroom doesn’t have to be too expensive and will add capital value to your property. If it’s like for like you can also claim this as a genuine expense and reduce your tax bill!
Lease your property to a housing association
This approach isn’t for everyone, but for those that do take the step it often results in a more stable financial performance of your property. Typically, this approach will have no void periods, guaranteed rent - and often can be maintenance inclusive. The stability, lack of voids and lack of ongoing costs really does show itself in your cash flow.
Turn your property into a HMO
If your property lends itself to it, turning it into an HMO could quadruple the amount of rent the property can generate. Managing an HMO isn’t for everyone and it does make the landlord liable for utilities and council tax - but when fully occupied they can be very lucrative. If you decide to explore this make sure you speak to your Local Authority to check if you require planning and/or a licence.
Consider the serviced rooms model for your property
More akin to a hotel than a buy- to-let, serviced rooms are usually rented on a short and long-term basis. Typically, they work well in popular towns and cities where there is a demand for overnight accommodation and the hotel market is expensive. Location and facilities are key - and don’t under estimate the additional work involved of preparing the property for each new guest. You can outsource this to specialist companies, but run your numbers through carefully to make sure you’re still the one making the profit.
Could your property lend itself to a holiday let?
If your property is in the right part of the country that has a tourism market, then you may be able to exit the standard rental market and let your property by the weekend, week or fortnight to holiday makers. This is a slightly different approach from Serviced Accommodation, but it is a very lucrative model. Don’t forget, furnished holiday lets (FHL) were excluded from Section 24 provisions.
9. Does your town or city have a student market?
Letting to students is much more profitable than a standard residential let. The rental yield is often calculated at room level but then managed on one tenancy agreement. You will find that you tend to have an annual turnover and increased maintenance costs, but could well be worth it.
10. Finally, review your finances!
Don’t forget another way to increase your profit is to reduce your costs. Take the time to review your insurance costs to make sure you’re getting the right cover for the right price, and the interest rate on any finances. Small changes can make a really big difference.
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