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Properties Articles

Rental Yields - How To Calculate & Maximise?





Rental yield is the measure of return that will be received from property investment through rent. To calculate this, the amount of rent received per annum needs to be divided by the purchase price and multiplied by 100. This will offer a percentage estimating the gross rental yield, however this does not factor in costings alike to mortgage repayments, insurance and upkeep. To take these into consideration, one must calculate the net rental yield, which also deducts the cost of owning the property.

Pont Street, 4 Bedroom Apartment - £8,450,000
Growth of property prices has been seen across London, although rental prices have not increased in line with these. Instead, rent has been seen to track the populations salary. This, in turn, has seen an inconsistency in rental yields.

In Prime Central London, rental yield percentages are lower in comparison to boroughs further out from the city due to inflated purchase prices. Therefore, fewer vendors / landlords buy property in these prime areas for a buy-to-let purpose. Instead, the purchase of these properties are seen as tangible investment for long term financial gain, due to prices in this sector most likely rising over time.

To maximise rental yield, a landlord can attempt a few things, including; increasing rent, decreasing rent (to reduce void periods), modernise the property (to increase rent), utilise agencies (proper advertising, higher rent).