How to Calculate a Rental Yield
If you are considering buying an investment property and becoming a Landlord then you have probably noticed agents referring to rental yields when describing the return available from a property. Rental yields are an ideal way of comparing the returns available from different properties and make it easy to work out whether or not something would make a great investment. Rental yields are calculated using the simple formula below;
Annual Rent Divided by Property Value Multiplied by 100
For example if the property would rent for £500 pcm and was valued at £100,000 then this would give you a rental yield of 6%. This would be the gross yield and generally when people quote rental yields it would be the gross yield that they are referring to. To calculate the net yield you would need to deduct all expenses from the annual rent so for example any void periods, agent fees, maintenance and insurance costs would all be deducted in order to provide the true net yield.
Rental yields can vary widely between different types of property and across areas and as a general rule you tend to find that higher value family homes will offer lower yields then cheaper priced properties. As a property Investor you are ideally looking to make money from both a return on the rent as well as from capital appreciation on the property. You will sometimes find that properties that offer the highest rental yields may have the lowest prospects for capital appreciation and vice versa. As an Investor it is important to first work out what you are looking to achieve and then follow an investment route best suited to reaching your goals.
If you are considering getting into ‘Buy to Let’ or indeed are already a Landlord and looking to grow your portfolio then we would be delighted to meet with you to discuss your plans and offer our advice. There are number of different property investment strategies and we would be pleased to assist you in developing a plan that works for you. Just book your consultation meeting here.
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