Working out rental yields

BBC's Homes Under the Hammer presenter Martin Roberts in Sheffield for one of his homebuyers seminars

BBC's Homes Under the Hammer presenter Martin Roberts in Sheffield for one of his homebuyers seminars

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If you’re a fan of TV property programmes, such as BBC1’s Homes Under the Hammer, you will hear much talk of the potential rental yield that a landlord can make on a house.

The yield is the annual return that someone who has bought a buy-to-let property is expected to make on their investment.

It is worked out by calculating what a year’s rental income would be, as a percentage of how much the landlord paid for the property.

So if as a landlord you were getting £500 a month in rent for a flat, then that sum would of course add up to £6,000 a year in total.

If you had paid £200,000 for the flat in the first place, the yield on the property would be 3%.

This calculation is for the gross yield, before outgoings such as mortgage costs, letting agency fees, repairs and running costs have been deducted.

l Rent rises slowed their pace in May as more tenants found it easier to make the jump on to the property ladder, according to a major lettings network.

Private sector rents rose by 0.1% month-on-month to reach £737 on average, according to LSL Property Services, which owns chains Your Move and Reeds Rains.

This rise is smaller than the typical increases seen over the last 12 months.

The slowdown was accompanied by an improvement in tenants’ finances.

It comes as mortgage lenders have reported that May was the best month they have seen since 2008.