Landlords and investors must look for ways to maximise the return on their investment. Considering the rental yield is crucial in finding a succesful investment.
Given the demand for rental property, there is a compelling argument for investors to snap up property to let. However, it is important that investors consider the market carefully and ensure they are comfortable with their investment.
Investors must make an informed decision
At Ariston Property, we have helped many investors find and then buy their ideal property, and we are here to help you. There are many things to consider when it comes to finding the best property for your needs, and we believe you should think about the following matters:
- Rules and regulations of the rental market
- What sort of tenant you want to let to
- Your total budget and can you cope with unexpected problems
- The expected return
These are all important aspects but considering that you intend to buy a property as an investment, you need to make sure that the property is able to offer you a good return on your investment. Some people invest in an area because they have a connection to it but many investors are happy to invest where the market suggests.
This means you should consider the rental yield on offer for property.
What is rental yield?
The rental yield is the return in which an investor should receive in rent from their property. The rental yield is expressed as a percentage, which is calculated by starting with the annual rental income of the property and then dividing this by the sum of money that has been invested in the home.
Does rental yield matter?
As you would expect, rental yield matters a lot. You need to achieve a satisfactory rental return because if your income is less than your expenditure you lose money. Even if you break even, you are not making a profit. While every investor and landlord should look to make a profit, it needs to be remembered that things can go wrong with the rental property.
If costs arise unexpectedly and you don’t have the funds to deal with these issues, you could be in serious trouble. Therefore, the rental yield is hugely important for a landlord and it is vital that you make this a key focus of any investment you make.
What is a good rental yield?
It is important for landlords to consider what sort of rental income they are happy with. You need to earn an income that covers all your costs while providing some additional income to either allow you to make a profit or at least allow yourself to put money aside for unexpected costs or improvements.
You need to calculate how many bills you have to pay each month, and this will help you develop an understanding of what sort of rental yield you need to earn each month. Many specialists believe that a return of around 7% to 8% is what you should aim for, but as stated, this is an area that each investor can consider for their own needs and purposes.
Of course, while there are expected rental yields for properties in all areas of the country, it is possible for a landlord to improve their expected rental yield. By making improvements to the home or offering additional services, a landlord can generate more income, improving their rental yield.
If you are looking for guidance and support in getting the best possible rental yield for your investment, contact Ariston Property and we will do everything we can to help you.