Rental Business: How to Maximise Your Profits as a Landlord
Even in challenging economic times, property is widely perceived as a wise investment. After all, the demand for housing isn’t about to go anywhere. If you invest wisely, and with an eye on the tax system, you could generate a sizeable income over the long term.
What is the average rental income in the UK?
According to HomeLet, a popular provider of landlord’s insurance in the UK, the average rental price for a new property in the UK was around £1,199 per calendar month. This works out at around 9.9% annually. In other words, you can expect to earn back the value of a property in ten years, provided that you let it out consistently. Naturally, this is before we factor in the cost of maintenance and general upkeep.
This figure has risen consistently over the last decade, especially in London, where, according to the data, it sits at around £2,000 per calendar month.
How to maximise your profits as a landlord from a rental business
Having made the investment, you’ll want to make sure that it pays. This is where optimising your strategy is vital.
First, it’s a good idea to shop around for the best deal on your mortgage. You can do this six months before the end of your fixed term. In doing this, you’ll be taking a gamble on the rate of interest declining or rising – but it should be an informed gamble.
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Given the changes to tax relief on mortgage interest rates, it might be a good idea to form a business. This goes especially for landlords with large portfolios. The more you’re renting, the more you stand to save by structuring as a company.
In some cases, it might make sense to entrust the actual management of your portfolio to an outside letting agent. All being well, this could mean that you aren’t committing any time or energy to the enterprise – you’re instead simply collecting the money and making longer-term strategic decisions.
What will make the difference to your prospects, however, is the degree to which you can rely on your tenants. If your properties are empty, then they won’t be earning any money. Look, therefore, for tenants who consistently pay the rent every month. Give them an incentive to continue doing so. Be responsive to their requests, and take reasonable steps to keep them happy.
Having your properties sit empty for just a few weeks out of every year can eat into your profits. Minimise your tenant turnover by seeking out reliable tenants and keeping them for as long as possible.
