Making buy to let property investment
Calculate the net and gross rental yield of your buy to let property
How to make a wise buy to let property investment
Rental yields are used to compare properties and to signify the rate of return from your capital investment. Often you will see rental yield figures and analysis performed by estate agents and investors looking to sell buy to let properties.
Urmston Estate Agents, VitalSpace have put some handy tips together on how to calculate the gross and net rental yields to help you make the correct rental property investment.
Calculate the gross rental yield
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To calculate out the gross rental yield, you will take the amount of annual rent income collected and divide it by the total cost of the owning the property. The result should then by multiplied by 100% for a gross rental yield.
Calculate the net rental yield
The net rental yield will help you to determine whether or not your property is a wise investment. If calculations show you are paying too much into your property, you can re-evaluate your investment decision.
Calculate your annual expenses by adding up a year’s worth of property repair costs, tenant vacancy, property taxes, landlord insurance and estate agents fees.
To calculate and work out the net rental yield, subtract annual expenses from annual rent and divide this result by the total cost of the property. The result should then by multiplied by 100% for net rental yield.
Clarifying the net rental yield helps you forecast your income and provide insight on how much money to set aside for property maintenance and other expenses
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