What is rental yield?
Rental yield is the return on property investments you are likely to receive from rental income. It is a percentage, calculated by taking the annual rental income of property and dividing it by the full amount that has been invested in that property.
What is a good rental yield?
Anything above five percent is seen to be good rental yield and an amazing return on investment. The average rental yield for the UK is usually 3.75%. Though, the North of England provides some of the best places to purchase property, with best rental yields for 2023.
The likes of Manchester, Liverpool, and Leeds have forecast yields of reaching up to 6.4% – almost double the average for the full country.
Rental income should cover the maintenance cost and running the property so, while London may be desirable, investors may be at danger of losing money from lower yields and top expenses.
How to calculate the rental yield?
There are 2 types of rental yields – net yields and gross yields. These are calculated using the following metrics:
Gross income: the full annual income collected from the property. It contains rent and any other extras such as payment for water, electricity, property management, rates, and other outgoings, if the tenant is paying these.
Net income: gross rental income less all expenses, such as water rates, council rates, maintenance, insurances, and property-management expenses. It is the amount the owner gets after all expenses have been paid. This excludes your mortgage repayments, anyway.
Ways to improve rental yields
Once you have picked a property for real estate investment, there are a few ways you can improve the yield, which are all about improving the attractiveness of your property to tenants. Here are the best ways to grow good rental yield.
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Renovate
Renovating can help you get a much higher rent, matched to the purchase price and renovation costs. This is a best option if you have an older house that has lots of refurbishing potential.
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Increase storage
If you have dead areas within the property, utilize them for storage. For example, you can create a new cupboard space or storage under stairs.
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Create an open-air entertaining room
Turn a courtyard or area of a backyard into a new living space using modern design, which is suitable for different demographics.
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Allow pets
Permitting pets in the property will allow you to attract much more tenants.
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Update appliances
Update the dryer, air conditioner and washing machines so that tenants have access to high quality amenities within your property. They will also be easier for you to maintain long term.
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Use better photos
Investing in high quality photography to market your property will attract more tenants.
How to get a higher rental yield?
If you are searching for long-term capital appreciation on a property investment, you will likely be drawn to up-coming urban places, where a rental yield of 4.5 percent is achievable.
If your main goal is maximizing rental income, you should consider less popular neighborhoods.
