An essential skill of any property investor is knowing how to calculate property yield to ensure that you don't get a diminishing return on your investment.
The yield of a property is the annual return you are likely to get on your investment. It is calculated by working out a year’s rental income as a percentage of what the property cost.
For instance, if the weekly rental on a flat is £200, the annual rental would be 52 times that, or £10,400. And if the flat cost £100,000 to buy, then the yield would be 10.4%.
This is of course the gross yield. The net yield is the figure after fees, repairs and running costs have been accounted for. Fees would include Stamp Duty, solicitors and surveyors fees, and letting and management fees. Repairs are for everyday upkeep such as plumbing and decorating. Running costs include such things as ground rents, and buildings and contents insurances.
Yield Calculator – click here to work out the percentage annual return you could get on your investment.
Investment Calculator – if you have an idea of the percentage annual return you want to get from your investment, click here to work out how much money you should spend on the property.