Refreshing your property before letting it out? Make sure to invest your money wisely to maximise rental yield.
Each decision you make when looking to maximise rental yields matters. From the layout and finishes to energy efficiency, it can have a direct impact on how much rent you charge and how quickly you attract tenants.
If you’re not sure where to start, we recommend working closely with an architect who understands rental yields. Learn more about what these are and how to work together to boost your ROI in this guide.
What are rental yields?
Rental yields are the percentage of your property’s value you make back in yearly rental income. To calculate this figure (also known as a property yield), you need to divide your rental income by your home’s market value, then multiply by 100.
Yield (%) = (rental income / property’s market value) x 100
So, for instance, a £400,000 property generating £30,000 of annual rent would have a yield of 7.5.
(30,000 / 400,000) x 100 = 7.5%
Exploring average rental yields for a specific area is an effective way to pinpoint investment opportunities and gain a better understanding of the income you can expect.
It also helps focus your architectural decisions on changes that add value, with each boost in percentage making a pretty big difference to your total profit.
What is considered a high rental yield?
PropertyData’s insights show that in the UK, a rental yield between 4-6% is a solid target for investors to aim for. If you reach 6% or higher, you’ll be making an excellent profit on your investment property. Anything beyond 8% is exceptional – and rare!
What affects rental yields?
Rental yields are affected by a wide range of factors. You’ll see some towns with a super high rental yield that’s driven by demand, for instance, with a more competitive market pushing prices up.
The average property price also has a lot of sway on yield. If homes are expensive, you might see a lower yield even with high demand, as your initial investment is far bigger.
Other factors that can affect rental yield include:
- Distance to transport links and amenities
- Investment and regeneration in the area (economic growth)
- Property type and size
- Local market trends
Last but certainly not least, we have property design. The amenities you add and the style you go for say a lot about how much monthly rent you can charge, with well-designed homes skyrocketing your rental yield.
What adds the most value to a rental property?
When working with an architect to maximise rental yield, understanding what adds value is a great place to start. Of course, this can differ based on location and your target market, which is something your architect should help you out with (more on that later in the article). You can also speak to local estate agents for insights into what bumps up rental prices in the area you’ve invested in.
There are, however, plenty of more general upgrades that are usually favoured across the board. Prioritising these is a sure-fire way to give your rental income a healthy boost, regardless of where you’re letting.
Let’s take a look at some of the top design choices that add the most value:
1. Create more rooms
Increasing the number of bedrooms in your property has one of the biggest impacts on rental yield. In fact, adding a room can increase the value of a house or apartment by around 15% while also leading to an uptick in demand, making it a win-win for your ROI.
Explore options for adding rooms to your property. You might convert a loft, for instance, into a bedroom, or split a double room into two singles. Even a small office space can add to the appeal of your home.
It’s important not to sacrifice the quality of your space, though. While an extra room is a perk, it should feel natural within the property’s layout and meet the needs of your tenant. Squashed rooms are never a good look.
2. Upgrade the bathroom and kitchen
Bathrooms and kitchens consistently rank highly in tenant priorities. By giving yours a quick refresh or a total renovation (your architect will help you decide which), you might be able to increase how much you can charge in rent.
Make sure to align your design choices with tenant priorities, focusing on high-quality appliances and efficient storage for a winning combination.
3. Add energy-efficient upgrades
95% of young renters want to live in energy-efficient homes, making this a key driver of high rental yields. From adding insulation to installing double-glazed windows, there are plenty of ways you can give your property’s efficiency a boost, helping you appeal to eco-conscious tenants. Speak to your architect about improving your Energy Performance Certificate (EPC) rating, which must be at E or above.
4. Enhance your kerb appeal
Don’t focus your efforts solely on your interiors. The outside of your property is just as important, especially when it comes to first impressions. Talk to your architect about low-maintenance ways to give your kerb appeal a lift, balancing a beautiful exterior with minimal upkeep for widespread appeal.
What to ask your architect
An architect’s expertise goes far beyond aesthetics. Your architect can help you make strategic decisions that directly influence your property’s rental yield, and it all starts with asking the right questions.
1. How can we maximise usable space?
As a key driver behind higher rental yields, you’ll want to create a feeling of space in your home. Ask your architect to focus on creating functional spaces that feel larger, without actually increasing the square footage. Discuss options for open-plan living, multi-use spaces, and putting underused areas to good use.
2. Which design features should I prioritise?
Your architect should have an understanding of what tenants look for in a property. To avoid transforming your space from top to bottom (and quickly exhausting your budget), ask which upgrades will have the most impact when it comes to renting the space out. Look for cost-effective refreshes that’ll warrant higher rent without skyrocketing your expenses.
3. How can we bring long-lasting appeal?
Longevity ensures the changes you make now don’t need to be upgraded in a few years. Ask your architect to focus on timeless styles rather than trends, and long-lasting finishes that’ll withstand everyday wear and tear.
4. How can we appeal to the local market?
Your target audience will vary depending on where you’re letting. A central property in a city, for instance, might have a younger market looking for shorter-term lets, while a countryside home may appeal more to families.
Ask your architect how they’ll align designs with your audience to ensure maximum demand and rental yield.
Final thoughts
With the right architectural expert by your side, maximising rental yields during a property renovation doesn’t have to be difficult. By simply focusing on the touches that tenants love, you can push the value of your property up and secure more viewings, all while creating a sustainable space that’s built to last.
Looking for an architect who understands your aims? Start your search at Design for Me.
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