Buy to let returns on the up as investors shell out more

Buy-to-let investments are providing higher gross yields despite rising property prices. This is the tenor of Mortgages for Business' Complex Buy-to-Let (BTL) Index.

According to the index, standard residential properties increased their yields by 6.3% in the three months to the end of September, up from 6.1% in the previous quarter. HMO properties, which are especially popular with student tenants, showed even more improved yields.

Gross yields tend to fall as property prices rise, but the fact that they are keeping up is taken as an indicator of the strong rental market.

At the same time, the Landlord Centre has found that BTL investors are purchasing more expensive properties with the average price stopping just short of £170,000 over the last quarter, an increase of over £7,500 compared to the period from April to June.

Apart from increased confidence and consistently high yields, competitive mortgages with low interest rates are cited as the main reason for investors to spend more. The research also showed that student properties performed better than other types of residential properties.

Whilst there is a plethora of news about the sector each day, the overwhelming trend has remained the same for a number of months: property prices are rising, but rents are keeping up. And despite more property sales, a large number of people remains keen to rent long-term, giving investors the security to be able to make long-term decisions about their properties.

Property market continues to soar

The Office of National Statistics (ONS) has published its latest statistics for the UK housing market and reports the highest year on year change since 2010.

House prices increased by 3.8% between August 2012 and August 2013 due to price increases in England, Wales and Northern Ireland. Scotland is currently lagging somewhat behind with a 0.7% decrease in property prices.

The overall trend for the UK property market is clear - prices are rising steadily. There is no sign of a housing bubble yet, but there is certainly an upwards movement. For potential investors, this is an interesting time to look for their next property.

Rising house prices are attracting more sellers into the market, increasing investors' choice of suitable properties. At the same time, while prices are starting to rise across the UK, they are moving slowly. Therefore, investors can still find very good deals.

Edinburgh is currently especially well placed for property investment. With sellers' confidence rising, more properties have come onto the market. At the same time, property prices in Scotland are rising even more slowly which means often property prices can be negotiated.

Looking at the longer-term development of your investment, demand for rental properties continues to be high and rents for high-quality properties are rising steadily. With property prices now rising as well, the capital value of the investment is increasing, too.

Look after your property and your property will look after itself

Well, maybe your property won't quite look after itself, but looking after your rental property is key to its performance. 

Whilst much has been written about competition for the best rentals among prospective tenants, there are certainly enough properties available to allow tenants to choose the better quality flats and houses first. For you as a landlord or a property investor, having a desirable property translates into achieving higher rents whilst maximising occupancy. 

So, what makes a flat desirable? There are obvious factors, such as location and number of bedrooms that can't be changed. However, a surprising number of small adjustments can make the difference between a property standing empty or being snapped up:

1) First impressions count

Make the property look fresh, welcoming and cared for. A new lick of paint will make a huge difference to someone looking to move into a new home. At the same time, you are showing tenants that, as a landlord, you care about the state of your property, encouraging them to look after it better.

2) Make your property energy efficient

If you are looking to invest in your rental property at all, improve its energy efficiency. Cavity wall insulation, double glazing, energy-saving light bulbs and efficient white goods are some of the ways you can help tenants lower their utility bills, making your flat more desirable.

3) Deep clean the property

Invest in oven cleaner, grout stick and a professional carpet clean. Showing your property at its best does not necessarily mean redecorating. Investing in a professional clean might well do the trick. 

Is it all worth it? A recent study by Strutt & Parker found that those who regularly invest in the maintenance of their investment, even with a sitting tenant, spend less over a three to five year period than landlords who wait until things get dire. 

Looking at Edinburgh, there is strong tenant demand, but at the same time, tenants do have a lot of choice, making desirable properties fly off the shelves.