Rental yields are the amount a property investor is likely to make each year on a property from its rental income. This is expressed as a percentage, to calculate the figure take the yearly income of the property and divide it by the total investment that you have made.
Knowing this figure is important to property investors as it helps ensure that they make a strong return on their investment. If the income from rent is less than the expenditure in property then the investor will be making a loss on the property. You must take into account all costs associated with purchasing a property, including those involved in your mortgage and also leave room for contingency in case something goes wrong at the property.
Recent analysis carried out by Sequre Property Investment looked into the rental yields for 21 major cities in England and Wales over the last five years.
The data showed that since 2015 the average rental yields across all 21 cities averaged 5.1% per anum
The best performing city over this time period was Manchester where yields sat at an average of 5.5% per year.
Other cities that had strong rental yields were Sunderland, Nottingham and Newcastle, where yields stood at an average of 5.4% per year.
Commenting on the report, Sequre sales director, Daniel Jackson said: The increasing cost of property coupled with current uncertainty within the rental market can make investing into the rental market a daunting business. However, it remains a lucrative venture for those who know where to invest and what to invest in."
He continued: “The key is to know your market and to appreciate that property investment should be undertaken with a long term view, rather than a smash and grab mentality. The historic market health of a given location can provide you with good insight in this respect but top-line rental yields can only take you so far.
“Utilising the knowledge of those in the sector is the best way to maximise your endeavours, whether it be through a tailored investment to suit your individual circumstances, the ability to access bulk deals that can minimise the initial cost of investing or even access to off-market opportunities that aren’t open to the average buy to let investor. All of these approaches can see you secure a far higher yield in any location when compared to the general market.”
These yields are increased for HMO properties, research carried out by BVA BDRC shows that their average yield is 7.5%. The research has further shown that those yields have increased by 0.6% between Q1 of 2020 and Q1 of 2021.
With the average UK rental yield sitting at 3.53% these two reports suggest that by purchasing property in the right cities savvy landlords are able to make far more than the UK average.
If you’re interested in purchasing a buy to let property and will be requiring a buy to let mortgage, why not discuss your needs with a specialist lender like Mercantile Trust today. We aim to help everyone, by reviewing your application in person, rather than on a computer. We offer great rates, a fast turnaround and exceptional service!
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