Landlords – how can you make more money on your rental?

Do you rent out a property? Whether it’s a flat or a family home, renting can be a great way to boost your income. However, when mortgage interest rates rise, you might notice that the profit you make on your property’s rental yield decreases. 

While average mortgage rates were below 3% in 2019, many landlords and homeowners can now expect to pay nearly double that. And, put simply, higher interest rates bring your rental profits down. (You can always check what you’re likely to earn from renting out a property by using a rental yield calculator).

It might not be possible to change those interest rates but there are ways to improve your rental yield. From improving your property’s energy efficiency to improving dynamics with your tenants, read on for several ways you can improve your rental yield and profit margins.

Property improvements

Perhaps the top way to get more out of your rental property is to invest in home improvements. Renovations and upgrades can increase the property's overall value and bolster its appeal. While cosmetic improvements can be beneficial, it’s wise to focus on investing in your property’s energy efficiency. 

Better insulation

One of the most effective ways to improve rental yields is by investing in better insulation for your rental property. Improved insulation not only enhances tenant comfort but also reduces energy costs, making your property more attractive to prospective tenants.

Where to start?

• Double glazing: Upgrading your property’s windows to double or even triple glazing helps minimise heat loss and reduce noise from outside, creating a more comfortable living environment. This can translate into higher rents and lower tenant turnover.

• Roof and wall insulation: Proper insulation in the roof and walls prevents heat from escaping, maintaining a consistent temperature within the property. This can lead to reduced heating bills, a significant selling point for cost-conscious tenants. It can also reduce the risk of damp and weather damage, further future-proofing your investment. 

  
  

There are a huge amount of insulation types to choose from, so it’s always good to compare suppliers and work out the best material for your needs. This could be spray foam, fibreglass, foam core, and more.

• Draught proofing: Sealing gaps and cracks around doors and windows can be a quick win. It helps prevent draughts and reduce heat loss.

  
  

It's important to note that the UK government introduced Minimum Energy Efficiency Standards (MEES) in 2018. These require rental properties to meet certain energy efficiency standards and non-compliance can result in fines. As such, investing in better insulation is not only a yield-enhancing strategy but also a legal necessity.

Switch to renewable energy sources

Another way to improve rental yields is by embracing renewable energy sources. With growing environmental awareness, many tenants are looking for properties that are more eco-friendly and energy-efficient. Switching to renewable energy sources not only aligns with these preferences but can also reduce long-term energy costs.

The best renewable energy source for your rental property will depend on a number of factors, including its location and size, the local area’s climate, and your budget. But what are your options in the UK?

• Solar panels: Installing solar panels can generate electricity and reduce dependency on traditional energy sources. In contrast to popular belief, you don’t need to live in a hot, sunny climate to install solar panels — both UK properties and those across Ireland can benefit from solar energy.

  
  

As an added bonus, you can sell any excess energy back to the grid, potentially generating additional income alongside your rental

yield.

• Heat pumps: Perhaps a little less well-known than solar panels, heat pumps are another excellent way to switch to renewable energy and boost your rental yield. You can choose from air source or ground source heat pumps, both of which bring unique benefits and downsides. 

  
  

Both systems provide efficient heating and cooling solutions, reducing your rental property's carbon footprint and making it more attractive to eco-conscious tenants.

Before installing heat pumps, it’s a good idea to explore each variety and work out which is best for your property. You can use our SpotDif search tool to explore local heat pump suppliers in your area. 

• Energy-efficient appliances: On a smaller scale, upgrading appliances to energy-efficient models can save tenants money on utility bills and make your property more competitive in the rental market. 

  
  

Accessing government incentives

Improving your rental property’s energy efficiency is an investment, and it requires finances in order to reap the benefits. However, for landlords in the UK, the government has some incentives and incentives and grants to support renewable energy adoption. 

The Smart Export Guarantee (SEG), for example, allows you to sell renewable-generated electricity back to the National Grid. This includes electricity generated by solar PV, wind, micro combined heat and power (micro-CHP), hydro, or anaerobic digestion (AD).

You may also wish to look into ECO grants.

Make the most of ECO grants

The Energy Company Obligation (ECO) is a government initiative designed to improve the energy efficiency of homes in the UK. Landlords can tap into ECO grants to fund energy-saving measures in their properties, which not only enhances rental yields but also contributes to a greener future.

• Free or subsidised improvements: ECO grants can cover the cost of insulation, heating system upgrades, and other energy-efficient improvements. This means you can make essential enhancements to your rental properties at a reduced cost.

  
  

• Higher energy efficiency ratings: Implementing ECO-funded improvements can boost your property's Energy Performance Certificate (EPC) rating, making it more appealing to energy-conscious tenants.

  
  

Navigating the ECO Scheme

To make the most of ECO grants, you need to work with accredited contractors and assessors who are familiar with the scheme's requirements. These professionals can help identify the most cost-effective improvements for your property and guide you through the grant application process.

What else can landlords do to improve rental yield?

Investing in your property’s energy efficiency is a great long-term strategy for making more money on your rental. However, there are some other strategies you can try, too.

Negotiate bulk discounts

When it comes to maintaining and upgrading your rental property, bulk buying can be your best friend. Seek out suppliers who offer discounts when purchasing materials, appliances, or services in larger quantities. Whether it's paint, flooring, or even maintenance contracts, these savings can significantly bolster your rental yield.

Develop strong tenant relationships

Happy, long-term tenants are the lifeblood of a successful rental business. Foster positive relationships by promptly addressing their concerns and ensuring the property remains in excellent condition. Conduct regular maintenance checks and communicate proactively to address any potential issues. You could also look at offering incentives for renewing leases, such as rent freezes or minor upgrades to the property. This reduces turnover costs and helps maintain a steady rental income stream.

Offer furnished rentals

Many tenants prefer furnished properties for the convenience they offer. Consider providing essential furniture and appliances in your rental units. While there may be initial expenses, you can charge higher rent and attract a broader range of tenants, including professionals and students who value the convenience of a fully furnished home.

Find great deals with SpotDif

Becoming a landlord can be a valuable investment and there are many ways you can increase your rental yield and profit margins. If you’re interested in making home improvements to boost your rental income, you can find fantastic suppliers with SpotDif. From solar panel installation to boiler maintenance, we can compare local service providers to help you find the perfect supplier.