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Editor: Shaun Callacher
How To Gain More Rental Profit
Below is 3 ways you can maximise your cash flow. Finding a property where you can maximise your rent will allow you to gain more profit. The higher the profit, the better your return on investment.
You can then focus on finding properties in the right area that will allow you to uplift your rental income and therefore give you a larger passive income in a short amount of time, compared to single letting.
I could probably write a whole book on each way to maximise the rental, but to get the point across in this post, I have just wrote a short summary of each:
Number 1: Renting Out The Property On A Room By Room Basis.
There is a housing shortage in the UK due to the lack of space, this is making house sharing becoming more and more popular. House sharing is where a multiple of people share a house together. They often share the kitchen, living room and often bathrooms in a house. You may be able to rent your property room by room and achieve more rental income then you would if you rented to a single let. If you have a house with more than 1 reception room you may also be able to change that into a bedroom. So for Example if you have a 5 bedroom house which has 2 reception rooms you could turn one of the reception rooms into a bedroom making the house now have 6 bedrooms which you can rent out separately. House sharing is not just for 18 year old students starting university it has become very popular for young professionals, blue collar workers and divorcees just to name a few. If you do rent out room by room you have to be aware of any licensing or planning that may be needed, such as HMO licensing.
HMO licencing is a mandatory licence brought in by many city councils for houses of multiple occupancy properties (house shares) that have 5 or more bedrooms on 3 or more floors.
Maximising Rent Number 2: Maximising From Housing Benefit Tenants.
A housing benefit tenant is somebody who claims all or part of their rental payment from the government. What a lot of landlords don’t realise is that these tenants are entitled to the full amount the council will give them for their family unit not the comparable rental cost, subject to you putting it in the tenancy agreement. In other words, if the family unit amount is more than the local rent in the area, providing you put this amount on the tenancy agreement you are entitled to that rent. The best way to show you how this works is to illustrate it with an example;
I own a 3 bedroom property in a strong rental demand area for housing benefit tenants. Other comparable properties on the same road achieve a rental figure for their property of just £450 per month. By understanding the above, I house a mother and her son. She being over the age of 35 and entitled to the full one bedroom rate is entitled to £400 per month rent. The son being over the age of 25 and entitled to the sharers rate is entitled to £240 per month. Together as a unit they are entitled to £640 per month (£400 + £240), not £450! By stating this in the tenancy agreement the local council have to pay out their full entitlement.
Although this may seem a little confusing at first, once you master housing benefits it can be a great way to produce high cash flow.
To check out local housing benefit rates in your area check out your local council website, they often have a list of what a certain family unit is entitled to.
I have found housing benefit tenants tend to check newspapers and letting agencies to find accommodation. It may be worthwhile putting a dummy advert out to see what response you get to test the demand in your chosen area. If I am looking for a certain size family unit I specify this in my advert.
Number 3: Maximising Through Short-Term Rentals.
With the growing traffic and demand on sites such as Airbnb.com, more and more people are deciding to go for the option of living in a house or apartment rather than opting to stay in a hotel for city or holiday breaks. What this means for us landlords, is if we have a property in a strong demand area people like to visit for short stays (city centre or near holiday destinations), we can offer our property out as a serviced accommodation and achieve more rent. By offering your property as a serviced accommodation you do have to provide bedding, kitchen equipment and more, but the cost of such can be outweighed by the fact you can ask for higher rent from short term rentals. Check out Airbnb.com to get some ideas and see what you potential can achieve.
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