Investing Capital

5 ways to make more money from rental property in 2018

At the start of a new year, so many of us are looking at what we can do in the 12 months ahead to make the most of what we have. This is as true for your investments as it is with anything else you own.

While more traditional investments into shares might not offer you many options outside of selling some and buying others, property, however, offers you a lot more options when it comes to making changes or adjustments. Particularly if your investments are into rental properties.

With us having talked about property investing a lot in recent times, I want to share some of the most notable ways you can embrace it further and do your utmost to make more money from rental properties in the year ahead.

1. Check your property investment portfolio is performing

If you have a portfolio of properties that are bringing you a rental income (be that residential or commercial), you should take this as an opportunity to check that you are making the returns you think you are.

It may sound an obvious point, but when you have multiple assets to manage (property or not), keeping on top of them to ensure you're seeing the returns expected can be complex.

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With your properties returning a regular yield, look at the rent that is coming from each and consider things such as whether this will be sufficient to cover any mortgage repayments if there is an interest rate rise.

Similarly, if you find that you have property that's not performing as you expected and it's unlikely to improve, it could be worthwhile giving thought to the possibility of selling and reinvesting into a new location (or even a new property asset) to achieve a better return.

2. Review your rental income

As the primary source of income from a direct investment rental property, the rental income is something you should be looking at closely.

When did you last compare your rents to other landlords in the same location? Are you charging a suitable and competitive market rent? If not, are you able to consider an increase as the property stands?

Increases to rents aren't something to be considered lightly, as tenants are rarely pleased by such changes. However, this might be a time to invest in renovations, which will allow you to more easily justify a rental increase whilst simultaneously improving the value of the property (ultimately helping to - potentially - achieve additional growth if the property is sold).

It is also worth noting that the improvements you make might be deductible from the rental income you make, bringing potential tax benefits and therefore increasing your actual income further.

3. Consider expanding your property portfolio

If you have a property that is not mortgaged, or you have been saving for some time, you might have the opportunity to take advantage of the low interest rates currently available (before the forecast rises materialise over the coming years).

By remortgaging your current property - or by investing your savings - you could lock in the low interest rates, increasing the total rental income you receive by adding a new rental stream from a new property.

By looking at the best locations - with many expecting this to be very much in the North of England in 2018 - you can take advantage of low purchase prices or investment requirements and high growth to make a rental income in the short term, whilst investing for significant growth in the long term.

When paired with the potential in improving the property as above - or investing into a property development opportunity - you could realistically expect to see an increased level of growth.

4. Refinance to achieve a return

Even if you already have properties mortgaged and have not saved sufficiently to increase your portfolio, it can be possible to achieve an increased return through refinancing.

There are two approaches to refinancing: unlocking a lump sum now to reinvest, or increasing the monthly return with lower mortgage payments.

With the former, if your existing property has increased in value, either through growth in the market or renovation, you may be able to refinance the property and take the extra value in a lump sum.

For example, image you buy a property for £150,000 and your tenants pay the mortgage payments, which provides you with an income that allows you to make additional improvements. This property increases in value and is now worth £165,000 as a result of these improvements. If refinanced, may be able to release this £15,000, which could subsequently be invested elsewhere.

Alternatively, you could lower your mortgage payments, potentially by taking advantage of a lower interest rate or by reinvesting your profits to increase the deposit amount.

Although this does require an up front cost, you could achieve a higher return on the same rental amount each month, improving the cash flow from the refinanced property.

5. Making a commercial investment

If you have taken action with some of the options above and have released some capital to be reinvested, you might want to consider adding commercial property to your portfolio.

As well as providing diversification to your portfolio - which should always be considered - commercial property often provides a higher and more secure rental income (obviously dependent on the business that it's let to).

Durham City shops - commercial property

By looking at prelet commercial property, you can see how good the current tenant is (in terms of timely payments, for instance), as well as their financial situation, allowing you to assess the stability of the business.

Alternatively, you could buy a property that is currently not let, with an aim to renovate and increase rental value, an expected popular approach for 2018 as Grade A office space becomes limited.

It's all about taking the time to review your property investments

By reviewing your property portfolio and taking some active steps in managing your portfolio of property investments, you may realistically be able to increase your income or achieve additional growth through selling or refinancing your property. Doing so can allow you to consider other investment opportunities for reinvesting the realised return.

As we've talked about regularly here on the blog, the opportunities for property investing are vast and varied. With Christmas giving us all a lot of time to reflect, and the New Year a perfect time to start taking action, if you have rental properties at the moment, 2018 could realistically be the year you begin to make more from them. 

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Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.