How to Improve Cashflow as a Landlord

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May 14, 2024

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How to Improve Cashflow as a Landlord

As a landlord, you will be receiving a monthly rental income, but there are various ways you can make this go further such as by increasing rent, decreasing expenses and knowing which tax deductions are applicable.

It’s no secret that being a landlord can be a very profitable business. The average landlord in the UK has around 8 properties in their portfolio, earning them approximately £8,250 per property each year. Over 25% of landlords in the UK reported that they make a profitable, full-time living off of their rental properties.

Investing in property and renting out is a great strategy if you’re looking to receive passive income each month. Not only do you receive a monthly rental but you can also benefit from tax deductions. Financing properties also allows investors to purchase homes with partial down payments while earning full rental income every month. 

Properties are also a great investment for the future. Properly maintained properties can appreciate in value substantially, meaning that resale opportunities are also profitable. Owning real estate as an asset can help diversify your investment portfolio and protect against the impact of inflation. However, investors should manage factors such as unexpected expenses, renovations and holidays to avoid any potential financial losses and negative cash flow.

Here are a few key ways that landlords can improve their cashflow and protect themselves financially.

Increase Rent

This may sound like the obvious first step but charging more rent is not as easy as it sounds. You need to make sure you are offering a competitive rate so always make sure to research rental prices in your area to work out what is reasonable. If you hike up the price too high, it could leave your property vacant for long periods at a time and could cost you money in the long run.

A strategy for increasing rent might be to shift your renting model i.e. rather than renting out the entire flat, you could rent out rooms individually. This works in areas that are densely populated with students. Changing up the model could be a simple way to earn more each month.

When increasing the rent for existing tenants, time it so that you change the prices when the tenant is renegotiating their individual lease. Also, try to operate with humanity – don’t make significant price hikes during holidays or difficult financial periods. If you are on good terms with our tenant, it could be better for keeping your property occupied and earning consistent income.

Explore Additional Revenue Streams

Depending on the property, landlords could increase their cash flow by charging for different features separately. For example, if the property comes with a garage or parking space, this could be something that is rented out at an additional cost. Large basements could be rented out for storage space, granny annexes could be converted and loft conversions could maximise space to have additional tenants. Think about how you might be able to use your property more creatively to generate income.

Upgrade Your Property or Offer New Amenities

You might be reluctant to invest in your property and upgrade it but this could help increase the property value in the long term and allow you to charge higher rent prices each month. Even with the initial investment, this could be a very effective way to increase cash flow.

Amplifying space by converting the garage into an additional bedroom could allow you to rent out to more tenants and increase the number of rent payments received each month. Kitchen or bathroom improvements could make a big difference to the desirability of your property and allow you to charge more each month. Even a lick of paint or a couple of new bits of furniture could be a low-cost way to give your property a modern makeover and encourage people to pay more.

Decrease Expenses

While we have explored different ways to increase income, there is also the option to decrease expenses. The first step to do this is knowing how much you are spending each month and seeing where you might be able to save.

There are many different ways you might be able to decrease expenses as a landlord. Here are just a few simple things that could make a big difference: 

  • Learn basic maintenance skills – your property will inevitably require repairs throughout the year. The average landlord spends around 1% of the property’s value on repairs per year – around £3,000. Getting your hands dirty and learning to do your own maintenance where possible – i.e. paintwork or unblocking a sink – could save you a lot.
  • Teach your tenants – teaching your tenants certain skills when they move in could save you money in the long run. Things such as learning to bleed the radiators or checking the fuse box after a power cut could prevent an expensive house call. It also helps you make a good impression on your tenants and could ensure that they renew their contract and keep your property occupied.
  • Get the right tenants – sometimes, it can be tempting to occupy your property as soon as possible but it is worth investing the time to find the right tenants who will pay rent on time and treat your property with care. Bad tenants can lead to problems with neighbours, damage to the property and, most importantly for cashflow, late or missed payments. Take the time to get references and do your due diligence to save you money in the long term.

Claim Tax Deductions

As a landlord in the UK, you’ll be entitled to certain tax deductions. You can claim tax deductions for any rental income payments including the use of furniture as well as charges for any additional services provided such as hot water, cleaning, heating and property repairs.

However, you will need to pay tax on profit received from renting out your property. The amount required will depend on how much profit you make as well as your personal circumstances. It is always worth calculating how much you need to charge, how much you can deduct, and how much tax you will need to pay to have a better idea of overall profit.