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How to maximise the potential returns on your property investment

Posted on Monday, April 15, 2019

Stricter mortgage lending rules, higher stamp duty and changes to mortgage tax relief are putting pressure on landlords. But, despite the increased financial burdens, it is possible to achieve a solid return on your property investment. You simply need to arm yourself with the right knowledge – and our best practice guide is a good place to start. 


How to maximise the potential returns on your property investment


1. Know how to calculate your ROI 

The first and most basic step is to know how to work out your profits or losses. You might find this formula for calculating your return on investment (ROI), and expressing it as a percentage, useful. 

ROI = Net Operating Income / cost of Investment x 100 

Remember that the cost of your investment is not simply the purchase price. It includes other expenses, such as maintenance and repair costs, taxes and mortgage fees. 


2. Seek out the highest rental return 

When buying, look out for properties with high rental yields. These properties will in a favourable location with lots of demand from tenants. Compare rental yields for the different properties you are looking at. This way you can calculate how quickly your investment will cover maintenance costs. 


3. Understand your taxes 

As a buy-to-let property investor, you need to factor in tax when calculating your ROI. Taxes you must pay include stamp duty, tax on rental income and capital gains tax, if you sell a property. The amount of tax relief you can claim will decrease further for the year 2019-20. Make sure you stay on top of changing regulations too. 


4. Screen tenants properly 

This should be a top priority. If a tenant fails to pay their rent, you will not have the regular cash flow to cover mortgage payments and other expenses. Also, if a tenant damages your property you will need to meet the cost of the repair. Be sure to perform background and credit checks as well as seeking references from previous landlords. Kubie Gold always thoroughly reference all Tenants before allowing them to take occupation. 


5. Reduce tenant turnover 

Maintain a positive relationship with your tenants so you can keep them long-term. This means you are less likely to be burdened with the costs of a vacant property. Communicate with tenants regularly, respond to their queries and take care of maintenance work, that you, as a landlord, are responsible for, swiftly and thoroughly. 


6. Have an exit strategy 

You need to have an investment strategy from the very beginning. Are you going to keep the property for the long-term or sell after a set period? Having an exit strategycan make sure you sell at exactly the right time to get the optimalcapital growth return from your property. 


If you want to achieve the maximum returns, you need to have a strategy, carefully consider all costs and be aware of the best time to sell. Planning to invest in Central London? Take a look at our properties for sale in Marylebone, Baker Street, Paddington and beyond.


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