Why do rental yields matter?
If you are investing in a buy-to-let property, then you want to ensure that you are buying a property that can generate a healthy monthly rent. The rent, or ‘yield’ that your property will generate is related to the demand that exists for your property type, the quality of the property and the location that it is in.
How are rental yields calculated?
Rental yields are calculated by working out what a property can be rented for as percentage of the property’s value. For example, if a property is valued at £100,000 and generates a rental return per annum of £7,000 – then the rental yield for that property is 7%.
What is a gross and NET yield?
The gross yield that a property generates relates to the rental amount as a percentage of the property’s value. The net yield is the figure that is left after all costs – such as mortgage payments, utilities and service charges are paid, as a percentage of the property’s value.