Up to this point, we’ve been talking about rental yield in the most basic of terms using just rent and purchase prices to calculate the rental yield percentage.
However, if you want a more accurate view of exactly how your investment will perform including any outgoings, then you will need to consider gross rental yield vs NET rental yield.
Gross rental yield is everything before expenses, while net rental yield is the rental yield figure after expenses.
Net rental yields are often favoured as they’re more accurate than gross yields. However, gross rental yields are easier for investors to calculate themselves.
Added costs that are factored into a net rental yield include maintenance costs, agent or management fees, mortgage repayments, and taxes like mortgage tax and stamp duty.
When working out net rental yield, you may also need to factor in the possibility of void periods where your property isn’t being occupied.
To be on the safe side, account for a month or two of rental loss so that you’re more prepared if you do encounter void periods.
The net rental yield can be difficult to calculate if you don’t already own the property or know the exact costs involved.
At RWinvest, we provide details on the net income for each of our investment opportunities.
This way, you’re able to find a high-yield property more quickly and easily than if you had to manually work out the rental yields yourself.
With us, you can expect to find properties with net rental yields up to 8%, which is some of the highest yield properties in UK figures.
What Is a Good Gross Rental Yield?
Since gross rental yields don’t factor additional costs into the property yield formula, rental yields may appear to be higher than they actually are.
For this reason, gross rental yields should be a little higher than net yields.
This way, the net rental yield you end up with, which is the accurate rental yield percentage, won’t seem low in comparison.
Good gross rental yields can fall anywhere between 6 and 9%. The current UK average gross rental yield is 4.66%, according to figures from HomeLet and the UK House Price Index.
What Is a Good NET Rental Yield?
After all additional costs have been accounted for, a good net rental yield should be between 5% to 8%.
A rental yield of this figure ensures the investor is still making a significant return on their investment, even after mortgage payments, taxes, and more.
A commonly asked question on rental yields is ‘is 4.5% a good rental yield?’ but the reality is that for the best returns, you should look for 5% at a minimum.
What Is an Assured Rental Yield?
You may have noticed that we mentioned assured rental yields earlier. Assured rental yields are some of the biggest perks of investing through a company and should be on every investor’s list of demands if they want to make the best returns possible.
An assured rental yield is a rental guarantee offered by the developer of your chosen investment.
Investing in a property with an assured rental yield allows you to receive a fixed return on your investment for a set period.
Usually, this will be at least one year.
After the assured rental yield period is over, you can still generate consistently high returns, provided you invest in an area with high rental costs and strong tenant demand.
Here at RWinvest, one of the top UK property investment companies, we offer assured rental yields of up to 8%.