Rental yield is how much profit you make from your property in a year, as a percentage of its value.
To calculate rental yield, you’ll need to take your annual rental income from tenants and divide it by the value of the property.
For example: if you receive £16,000 a year in rent on a property worth £200,000, divide 16,000 by 200,000 and multiply the result by 100 to get the percentage. In this example, your yield will be 8%.
What type of Rental Properties should I consider?
There are two types of Rental Properties, Houses of Multiple Occupation (HMOs) and Single Lets (Renting your property to one family) and the returns on each are different, as are the costs.
HMOs will give you a larger yield, but requires a HMO licence, will have more associated costs (Council Tax, Utility and repair costs etc.) and involve more management of the property and tenants. You can let your HMOs to either students or working professionals.
A single Let, would be to a family where the rent would be lower, but the tenants would be responsible for the utility bills and council tax, but as the landlord, you would still be responsible for the maintenance.
Tax On Buy-To-Let Properties
Remember you will need to pay income tax on the profit you earn from letting out your property in Northampton. The profit is what is left after you take the ‘allowable expenses’ from the rental income. Allowable expenses include agent fees, landlord insurance, maintenance, and repair costs.
Should I furnish my property?
If your property is an HMO, then you will need to provide furnishing in the bedrooms and communal areas. If you want to maximise your rental income, then stylish furnishing and décor will drive a higher rent. The look you want may vary between professionals and students, but the better looking the property (neutral colours work well), the higher the rents and you may have fewer void periods.
If you’re looking to rent your property to a couple or family, then again décor is important, because everyone wants to live in a nice house! However, you may well choose not to furnish it or provide white goods (washing machine etc.) as often professional couples and families have their own furniture and white goods. Whilst the rent will be lower, you haven’t had to purchase and maintain the furniture and white goods.
Rules For Houses of Multiple Occupation (HMO)
In Northampton, an HMO is a house occupied by three or more tenants, forming two or more households.
These tenants then share facilities such as the kitchen or bathroom. As a landlord of this type of property then there are a few things you’re legally obliged to do:
- Check smoke detectors are installed, checked, and certified annually.
- The electrical installation is professionally checked every five years.
- Annual Gas Certificate is completed and up to date.
- Adequate cooking and washing facilities are provided to meet HMO licencing needs.
- Ensure the property has rooms of sufficient size to meet HMO licencing space requirements.
- Communal areas are to be kept in clean and working condition by the landlord.
We manage many HMOs and can assist you picking the correct property, in the correct location and attaining the required HMO licence.
Taking Back Possession of Your Property
Occasionally Landlords will want to take back possession of their property, whether to move back and live there, tenants go into rent arrears, anti-social behaviour, breach of their tenancy agreement, etc.
It can be daunting, but at Nicholas Humphreys, we can help and guide your through the process of repossessing your property.