Identifying Good Rental Yields

What is a Good Yield on a Rental Property?

Anything above 5 or 6% is generally considered a good rental yield for an investment. In cities like Liverpool, however, it’s common for properties to generate yields as high 7 or 8%.

What’s classed as a good rental yield also differs between residential and student investments. So what is a good rental yield for student vs residential property? A minimum of 6% indicates a smart investment for residential property. For student accommodation, however, a rental return of up to 8% is a lot more common.

But why does student property generate good rental yield averages? Student tenants tend to reside within the same accommodation for at least one academic year, giving investors a secure period in which returns are assured and void periods dodged. Student properties also tend to come with a cheaper market price, especially since a lot of the properties are studio apartments. Paired with high monthly rent, investors can end up with a strong yield on rental property investments.

Residential property yields are also capable of reaching some very high figures. Our Parliament Square residential development, for instance, offers net rental yields of 7%.  However, since residential properties tend to come with higher property prices than student property, achieving stong yields can sometimes be more difficult.

Using Buy to Let Yields to Your Advantage

How Can I Maximise Rental Yield on a Property?

To maximise your properties rental yield, you need to increase monthly rental costs. But how do you do this? Here are four simple tips on how to maximise rental yield in your buy to let property.

1. Raise Monthly Rent Costs With a Rental Valuation

To maximise your properties rental yield, the obvious step to take would be increasing the monthly rental costs before you find your next tenant. Hire a surveyor to do a rent review, where they’ll assess the current rental market and work out the current value of the property. You could find that in line with market growth, your rental property is worth more than you think.

2. Update the Property to Add Market Value

If you’re not generating a high enough property yield, it could be that your rental property is in need of an update. Have a look at the current rental price of properties in the area, and pay attention to any features that they might have which your property doesn’t. Properties with modern kitchens and bathrooms, up to date decor, and some kind of outdoor space like a garden, yard, or balcony all tend to have higher rental value.

3. Offer Competitive Qualities

There are certain things you could offer tenants that may make your property more appealing. One example could be to include stylish furniture for tenants to use, along with state of the art white goods and fixtures. Another idea could be to make your property pet-friendly. Small things like this can go a long way in boosting the rental value of the property.

4. Look for the Best Units

If you haven’t bought an investment property yet, or you’re looking for a new investment to add to your property portfolio, keep quality in mind when searching for your next purchase. With off-plan developments, you will often be able to cherry-pick the best units. Apartments with balconies, spacious layouts, and modern designs tend to make a good investment as they generate the best rental yields. Focusing on property developments with luxury facilities such as an onsite gym or communal garden is another great tip. Properties with facilities like these are naturally higher in rent. They’re also hugely in demand right now, with more tenants seeking qualities like gardens in their rental property due to Covid-19 and the rise of working from home.

Using Rental Yields in Your Investment Strategies

So we’ve covered all the most important elements of rental yields, and hopefully, you’re feeling ready to take on your first or next buy to let investment and attract the best rental yields in the process. One final thing you need to think about is how you’re going to utilise rental yields in your property investment strategy.

When creating your investment strategy, you first need to understand your goals. Do you want to focus solely on rental returns, or are you more interested in capital gain? Or, are you keen to include both these goals in your strategy?

We already touched on the importance of focusing not just on rental yields but factoring in house price growth too. This way, you don’t limit your chances of making two types of return on your investment as yield and growth go hand in hand. This is something that you don’t get with the stock market, as investing in stocks only allows for one type of return. That’s why, when choosing between a pension or property investment, many people view property as a more lucrative option.

You should definitely take advantage of the potential for multiple returns that comes from real estate investing. Look at the statistics on house price growth in the city your investment is based in, along with any regeneration as this can boost growth massively. You also need to pay attention to demand in the area, as without this, your rental returns will be inconsistent. Increasing rental costs are usually a good indication of high levels of demand, so try and seek these out whenever you find an opportunity you’re interested in.

If you’ve found an investment property with a promising rental income, strong capital growth, and in an area with a thriving property market, you’re on the right track towards a lucrative and rewarding buy to let venture!

Best Areas for Rental Yields in the UK