Higher Rental Property Returns

With the average property to rent in the UK achieving no more than a yield of 5-6%, Landlords have long tried to increase their income by minimising costs, such as finding cheaper mortgage rates and reducing maintenance expenses.  With a tightening mortgage market the best option for many landlords could be to focus on increasing their income rather than trying to reduce costs even further.  Letting property on a room-by-room basis could dramatically increase rental income and with the right procedures in place, management time of flatshares can be kept down to a reasonable level.

Properties suitable to rent as a flatshare

A Property  to rent out on a room-by-room basis should have at least three,  ideally four or more bedrooms.  This could be a three bedroom flat where the living room is turned into an additional bedroom.  Tenants renting rooms usually don’t mind if there is no separate living room as long as the room sizes are sufficient and the kitchen is large enough to accommodate a dining table so housemates can invite their friends over for dinner. 

As more people will be living in the property, a second bathroom is ideal but a bathroom with separate toilet will help to speed things up in the morning.  Ex-council properties and flats are usually spacious and lend themselves perfectly to be converted into flatshares.  Students and young professionals from overseas are usually not concerned if the room is located in an ex-council property as long as the interior is of a reasonable standard and the property to rent is kept clean.

Differences between a property to rent and a flatshare

Landlords should consider potential problems before advertising their flat or house to rent as individual rooms.  Managing the flatshare is likely to require more time as individual contracts need to be drawn up for each tenant and the frequency of tenants moving in and leaving is likely to be higher.  For landlords, this means more time is required for viewings, preparing documents, collecting rent and deposits and monitoring rent payments. 

It is also advisable for landlords to visit the property at regular intervals to ensure rooms and communal areas such as kitchens and bathrooms are kept clean and tidy by the tenants.  Landlords letting a property as individual rooms are also bound by the Houses in Multiple Occupation (HMO) licensing, which requires landlords of certain HMOs to obtain a license.  Licensing is mandatory for HMOs of three or more storeys that contain five tenants or more.  The local council will be able to give advice which properties require a license.  Regulations relating to energy performance certificates and TV licensing are also different for a property to rent as individual rooms.

Although a number of different rules and regulations apply and need to be carefully checked before renting out individual rooms, the return for the landlord can be significant and many landlords have not looked back since going down this route.

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