Three ways to maximise the yield on your property portfolio

Choosing the right property is the first step to achieving the best yields and an attractive scheme in an up-and-coming location could stand you in good stead for years to come.

However as markets change over time, even the best-performing developments may start to lose their edge and landlords may have to work harder to maintain the same level of returns. Therefore success in the longer term depends on taking a pro-active approach to property management.

There are a number of reasons that yields may start to fall – many of them beyond your control. The demographics of an area may change over time, depending on the nature of employment in the area or the ranking of local universities, and you may have to adapt your offering to appeal to a different type of tenant. The advent of working from home, for example, has led to shifts in demand in some cities.

It could be that new developments have created an oversupply – a particular problem in areas where there has been heavy investment in student accommodation or ‘city centre living’. In some locations such as Birmingham or Manchester, the creation of new and ever more ‘shiny’ developments has resulted in greater competition for existing schemes and made it harder to attract tenants.

It doesn’t help if your property is starting to look dated or lacks the features that newer schemes are offering. Then there are economic factors such as those we are seeing at present, where there is the risk that a decline in affordability and rising inflation could put downward pressure on prices. That could mean landlords have to work harder to maintain yields.

While the first signs of trouble may be subtle – perhaps a slight increase in voids or more rapid turnover of tenants – it is worth addressing potential problems at an early stage. Even if there are no obvious warning signs, I would still recommend reviewing your portfolio regularly.

To carry out a review, you need to benchmark your properties against similar schemes and monitor trends in the local market. Find out who your competitors are and what rents they are charging, what type of tenants the area attracts and how this is this changing. What can you do to add value and how much would it cost? And are you missing out on other potential audiences?

Essentially there are the three options I recommend to achieve better returns, each requiring different levels of investment:

  1. A change of approach – before you commit to an investment programme, it may be worth trying something different instead – for example targeting a different audience, changing the description of the property, or offering flexible instead of long-term lettings. Experiment to see what works best.

 

  1. Repositioning – a quick makeover, which may involve redecorating, new flooring, rearranging the layout and adding accessories, can boost the appeal of a property with minimal investment and enable you to attract a broader range of tenants.

 

  1. Refurbishment – sometimes properties may benefit from more intensive works or structural changes but as this is capital intensive, you will want to be sure it’s worthwhile. In bigger projects it may be possible to carry out refurbishment in stages – so if you have multiple units in the same development, you could advertise each unit at completion or partial completion to assess the impact.

 

Achieving the best returns is not just a case of buying the right properties but adapting effectively to the ever-changing market – is it time for you to take a more proactive approach?

 

By Obi Williams 

 

About the author

A graduate from the London School of Economics and a former city broker, Obi has over 15 years of real estate experience in the UK and the Middle East repositioning and asset managing over £400M of real estate assets to date. His significant property sector knowledge and PropTech know-how led him to develop the Resify360 concept.

As Managing Director his role is to steer the strategic direction, oversee the finance function and ensure Resify360 delivers on its operational goals within an evolving ESG framework.

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