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Jan 25, 2023 How to increase rental yield

There are many things a landlord can do to increase rental yields. It might involve spending some money on their properties, but in the long term it may provide opportunities to legitimately increase rents and boost annual yields. What is rental yield? Rental yield is the annual rental income, divided by the total property investment a landlord has made, expressed as a percentage. Anywhere between 5%-8% is generally considered a good rental yield. Sign up today to be among the first to know about property for sale or to rent in your area. Calculating rental yield The easiest way to calculate gross rental yield is to divide the rental income you receive from a property (let’s say £1000 per month X 12 = £12,000) by the price you paid to buy the property, then multiplying this figure by 100 to end with a percentage. So if the property cost £250,000, the gross rental yield would be 4.8%. However, landlords also need to factor in all the other expenses involved in letting the property. This will be the costs of maintenance, marketing and managing the property, including mortgage repayments and insurance premiums. These need to be totalled up over a year and added to the purchase price. So the net rental yield (the yield in real terms) will be lower than the gross figure. Top tips to improve rental yield Boosting your rental yield is an important consideration for landlords. It could be the difference between making money from letting a property or not. But you should also think about the long term impact of decisions you make and how they will affect your tenants. There are lots of things to mull over as you consider how to increase rental yield. Invest wisely Investing in property requires a lot of research, hard work, and dedication. With each new purchase you will become more experienced and better equipped for the next investment. Nevertheless, it is always important to treat every new property as a business decision by carefully studying each potential investment as well as negotiating where possible in order to maximise your return. Review your outgoings The first place to start when thinking about improving rental yield is to look at your fixed costs. These are costs like your mortgage payments, insurance premiums and leasehold fees. Shop around to see if you can get a better deal on your mortgage and buildings insurance. Invest in up-and-coming areas Look at where the best locations are to achieve greater rental yields. Where are the up and coming towns and cities, with planned regeneration and government investment? Major infrastructure projects (such as HS2 and Crossrail) can give some areas a real boost, with the prospect of increased capital growth and greater rental values for the future. University towns and cities are also locations where yields can be significantly higher. Properties can be rented by multiple tenants who share facilities but are not part of the same household. These are called HMOs (Houses of Multiple Occupation). The drawback of HMOs for landlords is that there will be a higher turnover of tenants. Re-assess the rent you’re charging The easy solution for improving rental yield is to charge a higher monthly rent to your tenants. However, it might not always be reasonable or fair to do so. Ask a letting agent to assess the market rate for similar properties in the local area – you might be charging less than you could, or you could actually be over-charging. Rent review clauses in tenancy agreements give you the option of charging a different rate of rent during a tenancy. Refurbish/redecorate your property Make sure the condition of your property justifies any increases in rent you may be considering. Refurbishing and redecorating your property could also help in establishing long term tenancies, as it will show that you care about your tenants and encourages them in turn to treat the property with more respect. Doing some repainting, replacing carpets and giving bathrooms and kitchens an update could make tenants feel happier about paying a higher monthly rent. Aim for long-term tenants One of the best ways to increase rental yield and reduce your outgoings is to have the same tenants staying in the property for a significant amount of time. You won’t have the one-off costs involved in changing tenants regularly, or the maintenance expenses that are likely to be involved with a high tenant turnover. You can try and secure more long term tenants by being diligent with your tenant referencing process, looking after the property well and fostering good relationships with the tenants. Consider allowing pets To make your property more appealing and unique, you could become pet-friendly. The number of rental properties that allow pets is getting fewer and fewer, especially since the Tenants Fee Act limits the power of landlords to charge a higher deposit to cover potential damage. But prospective tenants who know they won’t be separated from their pets could be wiling to pay a higher rent as a premium. Improve the energy efficiency rating Making your property more energy efficient will also help to reduce energy bills, and perhaps make your tenants more willing to pay that little bit extra. It can be used as a selling point, if tenants can look forward to living in a warmer house that costs less to heat. Have you got the opportunity to extend your property? Not all landlords will have this option, but if there is space you could look at adding more rentable rooms, or increasing the living space. An attic could be turned into another bedroom, for example. Find out more about haart letting property management If you have a property to let, we can help with a range of property management services, advice and information about the lettings process.

Jan 25, 2023 What is a sitting tenant and what are their rights?

You may have heard the term ‘sitting tenant’ and wondered what it means. Here we explain what rights a sitting tenant has, how a sitting tenant may affect a property sale, and the choices landlords have if they are buying or selling a property with a sitting tenant. What does 'sitting tenant' mean? A sitting tenant, or ‘tenant in situ’, is a tenant that is still living in the property when it is sold by a landlord. This could be because a tenancy agreement is still in place. Buyers can respect the tenants’ right to remain living in the property. But a seller may choose to evict the tenants, if they are able to do so, because the selling price will be negatively affected with a tenant in situ. Sign up today to be among the first to know about property for sale or to rent in your area. What rights do sitting tenants have? Sitting tenants do have rights. If they have an ongoing tenancy agreement with the landlord who is selling the property, they have the right to remain residing there even after the sale. In the unlikely event that the tenancy began before January 1989, the sitting tenants can exercise their rights to ‘security of tenure’ under the Rent Act 1977. In these cases, tenants can remain in the property even after their agreement has expired or been terminated. A landlord has to prove they have ‘ground for possession’ for a pre-January 1989 tenancy in order to evict the tenant. However, there will be few tenants today with such a long standing agreement. Most tenancies these days are assured shorthold tenancies, which gives a landlord the right to use an eviction notice, even for a sitting tenant. Buying a property with sitting tenants If you are buying a property which has sitting tenants, the price you pay will be lower than similar properties which are sold with vacant possession. So if you want to save some money on the purchase this is a great way of doing so. However, you may struggle to get a mortgage offer on a property with sitting tenants, so this might only be an option for cash buyers. You could just wait until the tenancy has come to an end or the tenants have been evicted. Are you buying with a view to letting out the property anyway? Many landlords prefer to have a sitting tenant in the property they are buying, especially if they are long term tenants. It saves the hassle and expense of finding a new tenant, and continuing with a long term tenant is a much less risky option. The new landlord usually takes over the ownership of the tenancy agreement after the property sale. Selling a property with tenants in situ Landlords who are selling a property with sitting tenants may find it difficult, but not impossible. If they allow their tenants to remain in residence, the buyers of the property are likely to struggle to get a mortgage and proceed with the purchase. However, sales with sitting tenants are on the increase. If the sale does go through, the selling price will be lower with sitting tenants. If the landlord chooses to evict the tenant, the sale may be saved or run more smoothly, but rental income will be lost for the time it takes for the sale to complete. Frequently asked questions What qualifies you as a sitting tenant? Sitting tenants are those that have a tenancy agreement or agreement with a landlord in place at the time a decision is made to sell the property they are living in. You have more rights as a sitting tenant if your tenancy began before January 1989. Can you evict a sitting tenant? If you prefer to have vacant possession of the property, to live in the property yourself, or want to find new tenants, you have the right to evict the sitting tenants with a Section 21 notice. Do sitting tenants have the right to buy? Sitting tenants or tenants in situ do not have an automatic right to buy the property they are living in, unless it is a property owned by a local authority. Can you increase the rent of a sitting tenant? Normal sitting tenants have the same rights to fair rent as any other tenants. Landlords can only increase the rent when an existing tenancy agreement expires, unless the tenancy agreement has a rent review clause. If the sitting tenant has security of tenure (explained above), a landlord can only request to put the rent up through a review process. This can only be undertaken every two years, and has to be carried out by a Rent Officer. Find out more about Howards' letting property management If you have a property to let, we can help with a range of property management services, advice and information about the lettings process.

Apr 5, 2022 Howard's jargon buster

Think moving house is stressful? Then all of the added jargon that goes with the house buying and selling process can make it quite daunting. Our handy guide details some common terms and what they mean. Acceptance - If you wish to accept a lender’s mortgage offer, this document will need to be signed and returned to the lender. Amortisation - The gradual elimination of a liability, for example, a mortgage through regular payments over a set time period or the amount paid by way of capital or principle repayments on a loan annually. Annual Equivalent Rate (AER) - A notional rate that is often quoted on interest paid on savings and investments. It aims to demonstrate what your interest return would be if the interest was compounded and paid annually instead of monthly (or any other period). Annual Percentage Rate (APR) - The APR is a figure that is used to compare different mortgages. Defined by law, it includes repayments on the loan plus any fees such as booking, arrangement or redemption fees. The APR shows the true cost of borrowing, and should appear on all mortgage illustrations and quotes. Applicant - The name given to a potential purchaser, often used by estate agents/auctioneers. Appraisal Value – Property value as estimated by a surveyor. Appreciation – Increase in property value as a result of market condition changes. Arrangement Fee - This is a charge levied by the lender to cover the costs of administering and reserving the funds for certain types of mortgage. May be paid separately or added to the loan amount. Assured shorthold tenancy (ASTs) - This is the most common form of tenancy.  A tenancy can only be an AST if you are a private landlord or housing association, the tenancy started on or after 15th Jan 1999, the property is the tenants' main accommodation and you do not live in the property.  All of these must apply. Auction - A means of selling a property whereby it is listed at an auction and if the property does not reach the reserve price then it is not sold. If it does, then when the auctioneer's hammer falls that represents an exchange of contracts and the successful bidder is legally obliged to pay a 10% deposit and sign a memorandum of sale before leaving the auction. Completion usually takes places 28 days later and the buyer is not in a position to re-negotiate any of the stipulated terms and buys the property "as seen". Structural surveys and searches would have to be made in advance by a bidder. Base Rate - The lowest rate of interest a bank will charge when it lends money, used as a benchmark to set interest rates for borrowers. This rate is set by the Bank of England and is reviewed several times a year. Lenders will charge borrowers a margin above the base rate. Bridging Loan – A loan that is used to cover the overlap between the purchase of a new property and the sale of an old one. This will be a short-term loan. Building Survey – Full inspection of the property, carried out by a chartered surveyor. A detailed report will follow highlighting the condition of the property and any issues/defects. Buildings Insurance – An insurance policy that pays the cost of repair or rebuild in the event of your property being destroyed or damaged. This needs to be purchased before completion of your new property. Buy-to-let Mortgage – A type of mortgage specifically for those purchasing a property with the intention of letting the property out. Capital – Amount of money either put into buying a property or the deposit placed on a property. Capital Appreciation – Growth in the value of a property over time. Capital Gains Tax – A tax on profits above a fixed level made from the sale of financial assets such as property or shares. Capped-rate mortgage – A mortgage that sets a maximum rate on interest that a lender can charge for a specified period. Chain – Where a buyer is reliant on the completion of sale of their current property before they can complete on a purchase of a new property. Commission – An estate agent’s fee for selling the property. Comparative Search – The search that looks at sale values for similar properties in the same area as your property. Completion Date – The date of which the money is transferred from the buyer’s to the seller’s solicitor. The buyer will also become the legal owner of their new property on this date. Conditions of Sale – Details that set out the rights and duties of the seller and buyer. Contents Insurance – Insurance that covers the contents of your home such as your furniture, carpets, equipment like laptops and televisions. Conveyancing – The legal process surrounding the transfer of ownership of a property from a seller to a buyer. Covenants – The rules and regulations governing a property – these are contained in its Title Deeds or Lease. Deeds – The legal documents that prove ownership of a property. Deposit – Initial funds used as a payment upfront to a bank/financial institution in the purchase of property. Also known as mortgage deposit. Detached – A property that stands alone, and therefore not attached to another property. Disbursements - Fees paid by the solicitors on the behalf of a buyer. Examples include land registry and search fees and stamp duty. Also known as Legal Fees. Discharge Fee – Paid to some lenders for releasing their hold over a property once you have paid off you loan. This often occurs if you pay off your mortgage early before the standard term has run out. However, this is not always the case. Down Valuation – Where a lender restricts the amount you can borrow as a result of a surveyors valuation report indicates the property is not worth the sum sought. Draft Contract – A preliminary version of the contract drawn up when the sale is first agreed. This is uncorroborated version that will need to be confirmed by the seller’s solicitor and set out the conditions. Draft Transfer – A legal document issued by the purchaser’s solicitors setting out the terms and conditions of sale. Early Repayment Charge – A charge issued by the lender as a penalty if a mortgage is paid off within a specific period. Endowment Mortgage – Interest-only repayments combined with monthly premiums into an endowment policy. This is designed to pay off the loan at the end of the term. Energy Performance Certificate – This certificate measures the energy efficiency of a property using a scale of A to G. It is now a legal requirement to have a valid EPC before a property can be marketed. Equity – The amount of money either put into buying a property or the deposit placed on a property which exceeds the amount of any money borrowed against the property. Exchange of Contracts – The point at which confirmed and signed (by both purchasers and sellers) are physically exchanged. Both the buyer and the seller are now legal bound to the sale and purchase of the property at the agreed price. Fixed Rate Mortgage – A mortgage in which the interest rate is fixed/set for an agreed term or period of time. Fixtures and Fittings – These are the non-structural items included in the purchase of a property. These can include (but not limited to) light fitments, central heating boilers and radiators, bathroom suites, kitchen units, TV aerials and satellite dishes. Flexible Mortgage – An arrangement whereby you can increase or decrease your mortgage payments. Freehold – Where the owner of a property also owns the land that it is built on. Gazumping – This occurs when a seller accepts a higher offer on a property when they have already agreed on an offer from someone, prior to the exchange of contracts. Gazundering – This occurs when a buyer reduced their agreed offer prior to exchanging contracts. An example could be that the buyer has discovered some issues with the property following a survey report that was carried out, and therefore reduces the offer agreed accordingly. Ground Rent – A charge from the freeholder to the leaseholder. Guarantor – Someone who promises and signs to agree to pay the borrower’s debt or rent is the borrower or tenant defaults. Higher Lending Charge – An upfront, one-off charge to a lender to protect them against the borrower defaulting on the loan. This usually occurs on mortgages that are over 75% of the property value. Houses in Multiple Occupancy – A building of three floors or more that is occupied by three of more people. These people live as more than one household but share the use of facilities such as bathrooms and cooking facilities. Individual Savings Account Mortgage (ISA) - Interest-only mortgage linked to an ISA fund, which is designed to pay off the loan at the end of the period. Inflation - The rise in prices over time. Interest Charges – The charges that banks make on a loan, calculated as a percentage of the borrowed amount. Interest-only Mortgage – Now only offered with very strict lending criteria and aren’t available to everyone. A type of mortgage where the borrower only repays the interest on the loan for the duration of its term and repays the full loan amount at the end of the mortgage period. Joint Tenants – A form of ownership of land or property where there are two parties. If one of them passes away, their share of the property will transfer automatically to the remaining party which then gives them full ownership. Land Certificate – This document is issued by the Land Registry to the owner of the registered land as proof of ownership. This land document will include a copy of the register and the plan showing the extent of the land. Land Registry Fee – To be paid by a solicitor on behalf of the buyer to register ownership of property with the Land Registry (if freehold). Therefore once you purchase the property, you are the legal owner of the land. Land Search – This is where a formal application of an inspection of the Land Registry register. A certificate will be issued to show the current situation of the land in question. Lease – The legal document by which the Freehold or Leasehold owner of a property lets the premises or a part of it to another party for a specified length of time. Once this expires, the ownership reverts to the Freeholder. Leasehold – Where a person(s) owns a property but only for a set number of years. When the lease expires, the property returns to the freeholder. This is most common with flats; however, houses can also be built on leasehold land. Legal Fees - Fees paid by the solicitors on the behalf of a buyer. Examples include Land Registry and search fees and Stamp Duty. Also known as ‘Disbursements’. Listed Building – A building which has special architectural or historic interest which is officially listed so that it cannot be demolished or altered without prior local government approval. Maintenance Charge – Also known as service charges. These charges are the cost of repairing and maintaining external or internal communal parts of a building. These costs are charged to the tenant or leaseholder. Maisonette – An apartment, usually over one or two floors, which is self-contained and in a larger house. It will have its own entrance from the outside. Mortgage – An amount of money advanced by a lender (usually a bank or building society) on the security of a property. This is repayable over a long period of time. Mortgage Payment Protection – Insurance designed to pay your monthly mortgage for a limited period if you are unable to work due to illness, redundancy or disability. This is usually for a year. NHBC Scheme – A building guarantee that is available on some new build homes. Under this guarantee, any defects that occur within a specified time after construction are remedied. Negative Equity – When a property has decreased in value to below the level for which a loan was secured on it. Offer – The sum of money a buyer offers to pay for a property. Offer of a Loan – A formal document approving the mortgage you have requested and detailing the Terms and Conditions that apply. Office Copy Entry – The official document from the Land Registry which confirms the ownership of and borrowings against a property. Open House Event – A day or period of time of a day where a property for sale is open to a number of applicants to view at the same time. Open Market Value – The price a property should be able to achieve where there is a willing buyer and seller. Re-Mortgage – This is the refinancing of a property either by switching a mortgage from one lender to another or by taking out a second mortgage to take advantage of any equity gained by the rise in value of the property. Redemption – When a mortgage is fully repaid. Repayment Mortgage – A mortgage where the monthly payments are used to repay the interest and reduce the outstanding capital.  This means that each month you’re paying off a small part of your mortgage. Repossession – This occurs when a mortgage lender takes possession of a property due to non-payment of the mortgage the property is secured against. Retention – Where a lender has the ability to hold back part of a mortgage until certain conditions are met. Searches – A request or enquiry for information about the property held by a local authority or by the Land Registry. Semi-Detached – A property which is joined to one other property – this will be a house or bungalow. Service Charge – These charges are paid by the owner to cover the cost of providing various services which include (but not limited to) maintenance or repair of the building, communal areas, heating, lighting or security. Share of Freehold – Where a limited company owns the freehold on which a property stands and the shareholders of that limited company are the owners of the property. Short-term Tenancy – Occupancy of a rental property that starts at one day and can last for a few weeks or a couple of months. Sitting Tenant – This refers to a tenant who occupies a rental property when there is a change of landlord or the landlord decides to sell. Sole Agent – When the seller has agreed to sell their property through one estate agent only. Stamp Duty – A government paid tax to be paid by the buyer on a property. Usually expressed as a percentage of the purchase price and will vary depending on the value of the property. Standard Variable Rate – Mortgage lenders standard rate of interest. This can go up or down in line with market rates such as the Bank of England base rate Surveys – Inspection of a property and reports that comments of the structural conditions and more depending of the survey of survey you commission. Studio Flat – A flat which consists of one room that contains the cooking, living and sleeping areas with a separate bathroom or shower room. Tenancy Agreement – A contract between a tenant and landlord. The tenancy agreement will outline the terms and conditions of the rental agreement. Tenure – Conditions on which a property is held, for example leasehold or freehold. Terraced House – A property that forms part of a connected row of houses. Title Deeds – The legal title documents that prove ownership of a property. These are transferred to the new owner on the sale of a property and a copy is held by the mortgage lender. Title Insurance – The insurance policy which a buyer can take out to allow a sale to complete where there is a potential problem with the documentation in proving legal ownership of some part of the land they are buying. Title Search – An investigation carried out by a conveyancer or solicitor into the history of ownership of a property. This search will check for liens, unpaid claims, restrictions and any other problems that may affect ownership. Tracker Mortgage – A mortgage where the interest charged by a lender is linked to a rate such as the Bank Of England base rate.  This means your payments can go up or down. Under Offer – A status of a property that is for sale and the sellers have accepted an offer from a buyer. This is the status given before the exchange of contracts. Valuation – A basic survey of a property which estimates the value of the property for mortgage purposes. Mortgage lenders will need to see this before lending. Variable Base Rate – The basic rate of interest charged on a mortgage. Vendor – The seller of a property. Yield – The income from a property that is calculated as a percentage of its value.