Rental yield is one of those phrases that’s used regularly in the world of property investment. But just what does it mean and how do you work it out?
Put simply, rental yield is the return that you get on your investment. Property investors and landlords use rental yield as a means to monitor the value of their property investments and portfolios.
To calculate your rental yield, you take the yearly rent and divide it by the purchase price of the property. You then multiply by 100 to get a percentage figure.
So, say you bought a house for £100,00 and rent it for £500 per month, the yearly rent would be £6000
Your rental yield is then 6000/100,00 x 100 = 6%
It is worth remembering that this is your gross rent and does not take into account any other costs associated with the property. To work out your net yield, you need to take into account your maintenance, legal and other costs to get your net figure. This is much more accurate figure to gauge the value of your investment.
Yields vary across the country as property prices and average rents are different for each town, city and region, so it is important to know the local market in the area that you are investing in.