Rental Yield Calculator for Landlords
What is rental yield?
It’s the amount you earn from a property in relation to that property’s value. Essentially, your rental yield is a measure of how much of a return you’re getting on your property investment.
A good rental yield is essential if you want to stay afloat as a landlord, as you’ll always have maintenance and repairs to worry about – not to mention your own mortgage repayments. A good rental yield can also help you get by in less certain times, such as when you’re trying to find new tenants for a property.
How to Calculate Rental Yield
Here’s a simple formula to help you work out the rental yield on any property you own.
First multiply your monthly rental income by 12. Then divide this amount by the property value.
So to calculate rental yield:
[Monthly rental income x 12] / Value of property
Then multiply the amount by 100 to get your rental yield value as a percentage.
So let’s say you charge £595 a month in rent for a property you bought for £150,000.
The calculation for this property’s rental yield would be:
[595 x 12] / 150,000
This gives us a figure of 0.0476. Multiplied by 100, we find that this property’s rental yield is 4.76%.
Is this a good rental yield? It depends on where the property is based, as areas with higher property prices will inevitably give lower rental yields than areas with lower property prices. 4-5% is a good rental yield in an expensive city like London. But landlords in cities like Nottingham might enjoy rental yields as high as 12%.
Rental Yield Calculator – Other Calculations and Considerations
Do you regularly invest money in your rental properties, for maintenance or repairs? If so, deduct any amount from the annual rental income figure you use in the calculation, to get a more accurate figure for your rental yield. You may also want to deduct anything you pay for landlord insurance from your rental income figure.
If you are using the property’s purchase price to work out your rental yield, you might want to factor in other expenses, such as stamp duty, legal fees, renovation costs, and so on. This will give you an even clearer picture of the sort of return you’re getting.
Alternatively, you might want to work out your rental yield based on the property’s current market value, rather than the purchase price. This will help you determine whether you’re still getting a good return on your investment.
If you want to work out the rental yield for a property for which you’re yet to find tenants, you may have to use estimated figures in your calculation – the amount you intend to charge in rent. If you do this, your rental yield figure will only be provisional. But you can always do another calculation once you have exact figures to hand.
How To Increase Your Rental Yield
The obvious way to increase your rental yield is to charge more rent!
But of course, it’s a little more complicated than that. So here are some things to consider if you want to maximise your rental yield.
- Know Your Tenants. The more you understand what sort of tenants you want to attract, the better you can tailor your properties to meet their specific needs. And if your properties meet their needs, you can justify charging more in rent. If you want to attract students, for example, offer secure furnished properties with plenty of amenities nearby and with excellent transport links.
- Go Green. Invest in improving your properties’ energy efficiency rating. This will help you cut down on energy bills, so you’ll be able to make the most of your rental income. But this will also help you attract tenants, as most people these days are looking to live more sustainable lives.
- More Tenants Per Property. If you can’t invest in multiple properties, and you can’t raise the rent too much, you could consider adding extra bedrooms or bathrooms to your existing properties. More tenants means more rent, which means a higher rental yield. Just ensure you meet your local council’s space standards.
- Keep Your Properties Full. Any time your properties spend vacant will obviously eat into your rental yield. You can avoid vacant periods through simply asking your tenants to give you as much notice as possible when they want to vacate the property. The more notice they give you, the more time you’ll have to find new tenants.
- Stay Informed. Keep on top of the property market, and get ready to raise or lower your rent based on market trends. Also try and stay ahead of landlord laws and regulations. The better you can meet regulations, the more likely you are to attract profitable long-term tenancies while avoiding costly repairs and vacant periods.
Maximise Your Rental Yield With Professional Help
One important thing to consider when thinking about your rental yield is time.
Time really is money. And if you have to spend every waking hour managing your properties, then even a high rental yield will come at a significant price.
So why not let us take care of things?
Work with us, and we’ll help you ensure all your properties are totally compliant with all laws and regulations. We’ll help you advertise your properties to avoid vacant periods, and we can advise you on rent, furnishings, facilities, and other things to help you make your properties as appealing as possible. We can also advise you on changes to the property market, so you’ll know when to raise or lower your rent accordingly.
We specialise in making life as easy as possible for landlords. Our hands-on assistance combined with our expert advice will help you maximise your rental yield and get the best possible return on your property.
Head here to find out how we can help you boost your rental yield.
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