If you have a property which you are looking to buy to let or have any existing properties and want to know what a good rental yield is, we will be going through it in today’s blog.
What is Rental Yield?
Essentially, it is a measure of the return you receive on a given property. This value can be calculated, and once calculated can be affected by various factors including property prices, interest rates, appreciation, and overall fluctuation throughout the property market.
How to Calculate Rental Yield
Gross Rental Yield
In order to get the gross rental yield you need to divide your total annual rent by the price you purchased the property at, then multiply it by 100.
For example, if you have a property which you bought for £500,000 to let out, and receive a monthly income of £1,200. Your annual income from the property would be £14,400, and the gross rental yield would be:
(£14,400 / £500,000) x 100 = 2.8
It must be remembered that this calculation does not take into account any of the additional costs such as maintenance of the house, or mortgage repayments.
Net rental yield
This calculation is better as it determines your actual profit and takes into account any other costs. Firstly, you will have to take your annual rental income and deduct any associated costs. Then, depending on how you define the net rental yield, you will either divide it by the property value or the initial capital outlay on the house (full price minus what has been loaned via the mortgage).
If you are concerned about what is a good rental yield, you can take 7% as a good benchmark, with anything over this also being very good.
How to Increase Rental Yield
There are a number of things you can do to increase your rental yield, which includes any from the following and more:
Lower the Rent:
Lowering the rent essentially ensures that the price is competitive and accurate in comparison to its location, rooms etc. This makes sure that you will not have any long periods waiting for someone to rent the property.
Increase the Rent:
You could look into getting the property revalued if it has been a while since you last did it. Then, going off of their opinion, you may be able to increase the monthly rental price in line with the updated market value of the property.
Maintain the Property
When you are a landlord to a property, you should be sure to make visits every so often or organise people to make sure the property is well maintained and updated. This ensures that your property stays competitive and appealing to potential tenants. This point also falls in line with the point focused on increasing your rent.
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