Not all property strategies are high earners – one strategy may work well for one individual, but prove to be an utter disaster for another investor. The ones we’ve listed below tend to be amongst the highest yielding. One of them – HMOs – is for the full-time property investors, while the other two can be used by someone who has an interest in property, but works in another field altogether:
A House of Multiple Occupancy (HMO) will always have a higher yield than a traditional buy to let. That’s because there are multiple income streams (the number depending on how many rooms you have to rent out). A four-bedroom house, for instance, may take in £1500 per month as a single let to a family. But, turn the sitting room into another bedroom and rent rooms out to five individuals at £400 each, and you’ll make £2000 per month.
HMOs can be costly to buy in the first place; utility bills are included in the rent and there’s often a lot of maintenance involved. There’s also admin to worry about, as you’ll have a much higher turnover of individuals renting. Then there is the whole management side (it’s why many investors employ a management company to run their HMO).
For the full-time property investor though, who is keen to manage his or her own properties, focusing on HMOs can prove a very lucrative strategy indeed. You’ll need to be licensed with the local authority (and some are clamping down on HMOs), but once you have this, you’re up and running and could be looking at some very impressive yields.
These are like mini-apartments in the one building i.e. each large room (or studio) has its own kitchen facilities, separate sleeping area and sitting area. And, because it’s more a buy to let than a HMO idea, the tenant is liable for the utility bills. It’s billed as ‘micro-living’ and is proving successful in big cities where there are plenty of young people who can’t afford the cost of buying their own property, but no longer want to share a rented room in a flat with others. In some of the buildings, there are communal facilities too, such as roof terraces, a gym and garden.
This is a good strategy for someone who fancies the buy to let idea, but is looking for a bigger yield. There isn’t much maintenance involved here, since the building would be managed and the tenant-landlord relationship would be the same as buy to let. As a result, this would suit a professional who simply wants to invest in property in order to receive an additional income.
Social housing tenants
Some local authorities will rehouse council tenants in the private rented sector. The big plus for this type of strategy is that it tends to be a higher rent than if the property had been rented privately. Also, the council tends to lease the property for a minimum of two years and the rent can be paid directly to the landlord (rather than to the tenant). In this way, the rent is always ensured.
At the end of the tenancy the council will ‘make good’ any repairs. The downside is that while the council has leased the property, it’s not possible to sell it or change it in any way.
This would be a good strategy for someone who again works full time in a professional capacity in another job. However, he or she would need to spend a lot of time initially getting to know how the council’s housing system works.