- Get an initial valuation
In order to take advantage of the current market, it's important to get your rental pricing right whilst keeping your costs under control. There are two routes you can take in order to get a rental valuation, working with a letting agent or using an online rental valuation tool.
Working with an agent means you will incur fees, driving up your initial costs. Most high street agents' fees are 8 percent or more of the rental price for advertising, interviewing and credit checks. You could opt for an online letting agent but similar charges will apply.
If you're an experienced landlord and want to keep costs down, you could opt to do your own marketing and use an online valuation tool. To do this, you'll need to gather all the details of the property including the number of bedrooms, whether your property is larger or smaller than average and an estimate of its condition. Our friends over at Bramleys have an easy to use online tool which can be seen here. Other options include Your Move and OpenRent.
- Review the competition
When bringing a new rental to market, it's important to compare it with other prices and changes in your area.
We recommend reviewing industry reports such as the Homelet Rental Index. This provides monthly average rental figures for all regions of the UK plus a comparison with 2019 and an indication of the annual variation. Other reports that provide useful information include Zoopla's Rental Market Report.
There have been many changes to property and lettings legislation over the past 12 months, so it's also vital to make sure you are fully up to date. Our recent blog summarised all the key changes in the sector for 2021.
- Consider property improvements
Another key step when considering the best rental price for your property is to consider whether making improvements will allow you to charge a higher rent. Looking at similar properties in your area and what amenities and features they have compared to your property could help to identify any changes you could make.
Key considerations could be:
- Do you need to decorate the property to match similar properties in the area?
- Do some of the facilities like boilers, showers or appliances need to be replaced?
- Could you convert part of the garden to parking space?
- What is the proximity of your property to shops, stations, bus routes and other facilities?
If you are planning to invest in improvements, it's important not to forget all the other costs of being a landlord and ensure you have the funds available. These include the deposit and regular payments of a buy-to-let mortgage, legal fees and the costs of letting the property, the ongoing costs of rental maintenance, electrical and gas safety checks and the all important landlord insurance.
- Calculate the rental yield
Rental yield is one of the most important areas to consider when looking to buy a property and let it out. This will help you determine if a property is a good investment or not.
In order to work out rental yield, all you need to do is divide the annual rental income of the property by the total value of the property, then multiply that number by 100 to make the yield a percentage.
If you are planning to make changes and improvements, the estimated cost of this should be added to the total value of the property. Then you should compare the rental yields for the current and planned value of the property.
You can calculate both the gross yield and net yield for any property. The net yield considers annual running costs and other expenses, which is then subtracted from the annual rental income. Gross yield does not take this into account but instead calculates the yield based on annual rental income and the value of the property.
To calculate gross yield use this formula:
Annual rental income / total current or planned value of property x 100 = gross yield
To calculate net yield, the formula to use is:
Annual rental income minus annual operating costs / total current or planned value of property x 100 = net yield
Our team of experts are on hand to help you manage and grow your portfolio. Contact us today to find out more about our dedicated property landlord services.