Buy to Let Yeild Calculator
This calculator can be used to compare yields from different properties to assist your client in determining which is the most suitable as a Buy to Let investment.
Property Buy-to-Let Yield Calculator
The rental yield calculator helps you to work out the gross and net rental rates on individual properties and entire property portfolios if you want to check up on how your own current properties are fairing in the current markets.
Calculating your rental yield will enable you to find out if a Buy-To-Let property is a good investment. If you are considering a mortgage purchase, you may need to use a mortgage rental calculator.
Use our Calculator above or scroll down for guidance on how and why you should use it.
How To Use Our Buy-To-Let Rental Yield Calculator:
- Choose the correct drop-down box in the calculator first if you would like to figure out the rental yield depending on the cost of the property purchase or the current value of the land.
- When the rental yield based on the current valuation of the property has been worked out, insert the property value in the form.
- When you work out the rental yield based on the purchase cost of the house, you can either insert the entire cost into the given box, or you can use the plus button on the left to add factors such as stamp duty, mortgage fees and refurbishment costs if you want to break them up.
- Next enter in calculator the monthly rent number. That is how much rent your tenant owes you per month.
- You can type this into the calculator if you are aware of the sum amount of your annual costs. If you haven’t added it all up already, you can press the plus button to add individual costs such as council tax, insurance, land rent etc.
- When all the information has been entered, press the big orange calculate button to see your percentage of rental yields.
How To Work Out Buy To Let Rental Yield?
Working out your rental yield is pretty straightforward. Whether you’re working out rental yields for a single home, or assets that you already own. Divide your gross rental income by the value of the property and then multiply it by 100 to get a percentage of your yield.
Don’t forget to deduct everything you frequently spend on the properties or their upkeep from your annual rental income, or your yield percentage won’t be correct.
When you’re figuring out the rental yield for a property that you don’t own yet, it’s going to be impossible for you as you do not have tenants living in the property and paying rent. You will not yet know how much rent they are paying or how much your property expenses are going to be. You may use approximate figures in this instance but be mindful that your rental yield estimation is just as reliable as the numbers you put in it.
Why Is Buy To Let Rental Yield Important?
Achieving a good rental return is of the utmost importance when it comes to investing in properties.
If your income falls short of your expenditure, you will lose your money from the get-go. Breaking even means you don’t make or lose any money r. If you don’t make any money, how will you pay for issues with the property such as boiler break downs, leaks, roofing problems and so on. Not having the money to cover your obligations can not only leave you in the red but may get you into trouble with authorities.
What Is A Good Buy To Let Rental Yield?
An excellent rental yield for buy to let property is usually around 7% and up. If you earn less than that, then there might not be enough cash-flow in the property to cover your operating costs, mortgage payments and those unforeseen, expensive problems that sometimes crop up when you invest in buy-to-let properties.
If your mortgage payments are lower than the national average and you can get an excellent rental yield you will earn more money from your property. Keep this in mind when you are looking for new investment opportunities, you need to purchase a property in an area which has low priced houses but high rental value.
Emerging areas or areas which are showing future growth or investing in infrastructure can be good areas to start looking at. Similarly – below market value properties can often seem like a good deal. But, if the rental return is, let’s say, only 5%, then month-by-month your income is unlikely to cover even your base costs.
Capital growth-focused investors who can get low rate mortgages often prefer city or outskirt investments as they have the potential to increase dramatically in value over a period of time. They prioritise the future sale price of the property over rental yield.
What Makes A Good Buy To Let Investment?
Although a good rental return is extremely important when deciding which investment property to invest in, there are, of course, other factors that you will need to figure out as an investor. While it is of great importance that rental income is high enough to cover expenses, that does not mean that you should be looking to get the highest possible return.
For example, there are areas in Birmingham where you can see rental yields of more than 10% for single let buy-to-lets. Will this make these properties great investment opportunities? Unfortunately, not.
Most of these houses are back-to-backs or terrace houses that have little to no chance of ever-increasing in value. Properties like this are usually in unfavourable areas, the tenants may be unreliable payers, and more often than not, they turn out to be rather tricky people to deal with. In essence, the house may also be difficult to sell once you’ve realised you need to get out! An exit strategy is something you should almost always consider.
We hope the buy to let calculator helps you to find the property that has the rental yield you are looking for.