What is a Good Rental Yield?

If you’re in the process of buying an investment property and taking some time to shop around for the best opportunity, you could create your own rental yield calculator in excel. For this, all you would need to do is create a spreadsheet using numerical formulas to instantly multiply and divide each figure. This way, you’ll have your very own rental yield formula set up which will allow you to work out a yield for multiple properties at once. Alternatively, if you only need to check the yield of one or two select opportunities, you could use a buy to let yield calculator to help you discover the final percentage quickly and easily. For those exploring how to become a property developer rather than just purchasing a new build or off-plan property, it’s important to also factor in additional costs into your yield calculation. This includes the amount of money you will be spending on renovations.

Residential property yields are also capable of reaching some very high figures, such as our Hollywood Manchester apartments with a net rental return of 8 per cent. However, since residential properties tend to come with higher property prices, achieving higher yields can sometimes be more difficult than with student apartments.

How to maximise rental yield on a property

To maximise your properties rental yield, the obvious step to take would be increasing the monthly rental costs before you find your next tenant. To justify this, you might need to update the property to add some market value or offer competitive qualities such as making your property pet-friendly.

The only way to increase rental yields is to make your rental property more attractive to tenants in order to raise monthly rental costs. Have a look at the current rental price of properties in the area, and pay attention to any features that they might have which your property doesn’t. Properties with modern kitchens and bathrooms, up to date decor, and some kind of outdoor space like a garden, yard, or balcony all tend to have higher rental value. It’s worth keeping this in mind before you make your first buy to let investment as properties with these features are likely to see a lot of demand and generate larger amounts of rental income. If you’re using a management company to help you find tenants, utilising these qualities in your property will make the property managers job easier too.

Liverpool rental yields

Located in the north-west, Liverpool is one of the UK’s top buy to let cities. Not only does Liverpool have a high rate of property growth due to extensive regeneration, but the city also has one of the highest average yields on rental property based on current statistics. In Liverpool as a whole, rental yields stand at 5.05 per cent on average, while certain postcodes such as L6 boast some whopping yields of up to 14.99 per cent. Some of the other best rental yields by postcode in Liverpool are all based in the city centre, including L1 with yields of up to 13.63 per cent, L3 with potential yields of 11.59 per cent, and L2 which generates yields of 10.48 per cent. Average rental yields in this city even outrank many countries with the best rental yields in the world 2018, such as Germany with an average rental yield of 3.99 per cent.

When creating your investment strategy, you first need to understand your goals. Do you want to focus solely on rental returns, or are you more interested in capital gain? Or, are you keen to include both these goals in your strategy?

We already touched on the importance of focusing not just on rental yields but factoring in house price growth too. This way, you don’t limit your chances of making two types of return on your investment as yield and growth go hand in hand. This is something that you don’t get with the stock market, as investing in stocks only allows for one type of return. That’s why, when choosing between a pension or property investment, many people view property as a more lucrative option.

You should definitely take advantage of the potential for multiple returns that comes from real estate investing. Look at the statistics on house price growth in the city your investment is based in, along with any regeneration as this can boost growth massively. You also need to pay attention to demand in the area, as without this, your rental returns will be inconsistent. Increasing rental costs are usually a good indication of high levels of demand, so try and seek these out whenever you find an opportunity you’re interested in.

If you’ve found an investment property with a promising rental income, strong capital growth, and in an area with a thriving property market, you’re on the right track towards a lucrative and rewarding buy to let venture!