How to Increase Rental Yield in the London Property Market
Making money from a rental property in London isn’t always easy, but with the right approach, landlords can boost their rental income without spending a fortune. From keeping your property in top shape to choosing the right tenants, small changes can make a big difference. With rising costs, evolving landlord regulations, and shifting tenant expectations, knowing how to keep your buy-to-let property profitable is more important than ever. Recent data from Rightmove suggests that energy efficiency rules, mortgage rate shifts, and regeneration projects are all shaping the lettings market, so staying informed is keyÂ
What We Have Covered In This Article?
2. Understanding Rental Yield and why it matters
What is Rental Yield?
Rental yield is the amount of rental income you earn each year as a percentage of your property’s market value. It’s a simple way to measure how well your buy-to-let investment is performing. Gross rental yield is calculated before expenses, while net yield factors in costs such as maintenance, letting agent fees, and mortgage repayments. The higher the percentage, the better the return on your investment property.
What’s a Good Rental Yield in London?
London rental yields usually sit between 3% and 5%, depending on the area. Some parts of East London, like Barking and Dagenham, offer higher yields, while prime locations like Chelsea tend to be lower due to high property prices. Comparing different boroughs can help you find better returns. House prices in London have edged up recently, while buyer choice is at a 10-year high, making it a competitive market for property investorsÂ
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Ways to Increase Rental Yield in London
Keep Your Property in Good Shape
A well-maintained property attracts high-quality tenants and justifies higher rent. Fresh paint, modern kitchens, and tidy outdoor spaces can all make a difference. Small updates like replacing old carpets, installing energy-efficient lighting, and upgrading appliances can improve your property’s appeal without breaking the bank. Making sure the heating and insulation are up to standard will also help keep tenants happy and reduce complaints about high energy bills. With the government confirming that rental properties must have an EPC rating of C or above by 2030, improving energy efficiency now can future-proof your investment and increase demand from eco-conscious renters (Source: https://www.rightmove.co.uk/news/articles/property-news/).
Make the Most of Your Space
Space is limited in London, so finding smart ways to optimise your property can increase rental yield. Converting a loft or garage into an extra bedroom or office space can add value. Built-in storage solutions help tenants maximise space, making even a small flat feel more spacious. If you have a garden or balcony, transforming it into a functional outdoor space with seating or greenery can make a rental more attractive. Flexible layouts are particularly appealing to remote workers and young professionals.
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Find Long-Term Tenants
Minimising void periods is essential for increasing rental yield. Tenants who feel looked after are more likely to renew their lease. Responding quickly to maintenance requests, allowing minor personalisation like hanging pictures, and offering flexible lease agreements can encourage tenants to stay. Long-term renters provide stability and reduce the costs associated with frequent tenant turnover, including advertising, referencing checks, and potential rental voids.
Set the Right Rent
Charging too much can leave your property empty, while underpricing means missing out on potential income. Researching rental trends and comparing similar properties in your area will help you set a competitive price. If you use a letting agent, make sure they have a strong understanding of the local market. Small, regular rent increases in line with inflation are easier for tenants to manage than sudden large hikes. With mortgage rates recently dropping to 4.5%, landlords who remortgage now may find it easier to keep rental prices competitive while still making a profitÂ
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Buy in Areas with High Rental Demand
Some parts of London are experiencing strong rental growth due to new transport links and regeneration projects. Areas like Woolwich, Croydon, and Stratford have seen property prices rise while still offering decent rental yields. Investing in high-demand areas with good schools, transport connections, and local amenities will help attract long-term tenants who are willing to pay more. Keeping an eye on upcoming infrastructure projects and gentrification trends can help you make informed buy-to-let investment decisions.
Cut Down on Unnecessary Costs
Earning more from your rental doesn’t always mean charging higher rent. Reducing expenses can have the same effect. Refinancing your mortgage to a lower interest rate, installing smart meters, and using energy-efficient appliances can save money in the long run. Regular property maintenance prevents expensive emergency repairs. Some landlords find that using a letting agent helps reduce costs by preventing costly mistakes and ensuring consistent occupancy.
Offer Extras That Tenants Want
Many tenants look for properties with added convenience and value. High-speed broadband, modern appliances, and smart home technology are desirable features, particularly for professional renters. If you’re letting to students or young professionals, furnishing the property with quality furniture can allow you to charge more. If your property is in a competitive market, offering inclusive bills can help attract tenants and reduce void periods.
Short-Term vs Long-Term Lets
Short-term lets, such as Airbnb, can generate higher rental income per month than traditional tenancies, but they come with higher management costs and increased wear and tear. They require regular cleaning, key exchanges, and compliance with local short-let regulations. Corporate lets provide a middle ground, offering premium rental income without the frequent turnover of holiday rentals.
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Allow Pets to Widen Your Tenant Pool
Many renters struggle to find pet-friendly properties in London. Allowing pets can help your property stand out and attract responsible tenants who are willing to pay more. Introducing a pet policy, including pet deposits and regular inspections, can help mitigate potential damage while increasing demand from long-term tenants.
Use a Property Management Service
If managing a rental property feels overwhelming, hiring a professional letting agent can ensure your property is well-maintained and tenanted. Property managers handle tenant screening, rent collection, and legal compliance, reducing the risk of costly disputes. While there is an upfront cost, a good property management company can help maintain steady rental income and optimise rental yield.
Maximising Your Rental Investment
Increasing rental yield in London isn’t just about setting higher rent. Keeping your property well-maintained, cutting unnecessary costs, and attracting the right tenants all contribute to a profitable investment. Simple upgrades, a strong understanding of market trends, and proactive management can help you get the best return from your buy-to-let property. With upcoming changes to energy efficiency rules and shifting mortgage rates, staying ahead of market trends will help landlords maintain strong rental yields for years to come
