It’s no secret. The cost of living in the UK has significantly increased over the past few months. Energy prices are the most notable increases that are affecting thousands of households including the rental market. Some landlords are already experiencing energy tariff increases in excess of 20%. On 1st April, the Energy Price Cap will be lifted and pundits speculate that energy prices may increase by as much as 51%.
On 16th December last year, the Bank of England increased the base rate from 0.1% to 0.25%. The decision was largely driven by the rate of inflation in the UK. The Bank of England had forecast 5% inflation however, in April 2022, this is likely to rise to 6% due to energy price rises. Whilst the latest tweak to interest rates was a nominal increase, there is much speculation that small interest rate hikes are likely to occur throughout this year and possibly into 2023.
Finally, it is largely tipped that Council Tax is likely to rise by circa 4% for the 2022/23 financial year.
In summary, the cost of home ownership is increasing and this puts pressure on rental yields.
Landlords call us looking for advice on how to mitigate costs with the view to increasing (or at least, maintain) rental yields so we have written this short article with 5 helpful tips. Some or all of these might be of use to you!
1. RENTAL INCREASES
This is the most common fall-back position for most landlords and in the majority of cases is the quickest and most effective solution to the problem but there are risks.
Consideration should be given before making any increase and by how much as a sudden rental adjustment can make the property unaffordable to existing tenants (depending on the amount and timing of the increase). Weigh up the pro & cons as your existing tenant may have been living at the property for some time and has looked after the house well and paid their rent on time.
Speak to an Estate Agent who can offer advice and provide a summary of rental amounts achieved in the area. This could be a useful guide to understanding the market before making any hasty decisions.
2. LANDLORD’S EXPENSES
This is a good time to review the outgoings of your property. There may be savings to be made by reviewing the following:
Buy-to-Let mortgage interest rates. If your redemption period is close or you are able to switch mortgage products, there may be a better deal available which could save you money. Speak to your Buy-to-Let lender, Mortgage Broker or Estate Agent for advice and assistance.
Landlord Insurance. If not closely monitored, insurance premiums can become uncompetitive. When was the last time you obtained a quote for Landlord Insurance? There are comparison websites that offer a free and quick service to help you find the most competitive insurance policy.
If you are already a HMO (House in Multiple Occupation) landlord, you could explore pricing on:
- Energy Prices
- WiFi costs
- Estate Agent’s management / letting fees
- Maintenance
3. ENERGY EFFICIENCY
Consider whether your property is energy efficient. There may be small improvements which can not only reduce the cost of heating the property but also have a smaller Carbon Footprint.
Improved insulation can drive down the cost of heating and you may be eligibile for Government grants to help with the cost of improvements. The Government is proposing stricter EPC (Energy Performance Certificate) ratings on all rented properties by December 2028. Whilst this may seem a long way away, small improvements now may save large and sudden cash outlays in the future.
As people are becoming more conscious of the environment, properties that are more energy efficient will become more attractive to rent.
4. MAKING GOOD USE OF SPACE
Some landlords are already looking at ways of maximising space in their rental properties. If it is practicable (and possible), could there be an opportunity to convert or create space for an extra bedroom? Extra Rooms = Extra Rent and whilst there is likely to be an initial outlay to obtain the extra room, the cost benefit may be in your favour.
Rooms with ensuite bathrooms are attractive to tenants (especially in shared households). These rooms also attract higher rent and should therefore be considered as a workable solution.
5. CONSIDER HOMES IN MULTIPLE OCCUPANCY (HMO)
A HMO is widely understood to be a property rented by three or more unrelated tenants.
Consideration needs to be given to the costs associated in having a HMO. Typically, these can include:
- HMO Licencing
- Improvements to bring the property to HMO standards
- Management / cost of running a HMO
Consultation with your local City Council will be required to change the usage of the property to grant HMO Planning Permission.
Whether you are an existing landlord in Sheffield, looking to purchase your first Buy-to-Let property, or thinking about making improvements to your existing rental property or converting to a HMO, contact Nicholas Humphreys (Sheffield – Broomhill & Crookes) on 0114 470 4715 or e-mail sheffieldwest@nicholashumphreys.com, we can provide you with expert advice and assistance with all your rental requirements including rental yield improvements.
Our office is open 7 days a week from 8am to 8pm.
