How to Calculate the Net Rental Yield for a Rental Property

One of the most important factors that any landlord needs to consider is rental yield. This helps you to work out whether a property could be a good investment. Rental yield is often used to determine whether a buy-to-let mortgage is affordable.

Rental Yield

Rental yield relates to the amount of money you will receive annually. The yield is referred to as a percentage of the property’s total value, and it allows buy-to-let investors along with landlords to determine if a property is a good investment. Rental yield can also be used to calculate how affordable a buy-to-let mortgage is by lenders such as the high-street banks.

There are of course other factors that should be taken into consideration when determining whether it’s worth investing in a property, but rental yield is a good starting point.

Rental Yield Calculator

Calculating a property’s rental yield is quite easy. Firstly you need to find the property’s annual rental income. Divide the figure you have by the value of the property. Now multiply this figure by 100. The figure you end up with is the percentage you need.

For example, if your income from the rental is £15,000 annually, and the property has been valued at £225,000, your rental yield will be 6.6%.

If you are trying to estimate your rental yield for a property that you have not yet purchased, it gets a little more complicated. In cases such as these, you need to think about what the rent will realistically be. It would be helpful if you did some research in the local area to determine what the average rent is.

The UK’s Rental Yields

Some of the UK’s best areas are Romford, Luton, Dartford, Rochester, and Watford. When it comes to the issue of capital gains it was found that commuter belts in the South East of England are the best performers.

Dartford 17.75% capital gains

Watford 17.17 capital gains

Ilford 17.04 capital gains

Enfield 16.97% capital gains.

These are some of the best areas in England to invest and sell a home, but it’s worth remembering these are at the top end of the scale, and the average rental yield in the UK is much lower than this.