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Best rental yields when renting a property

by | Jul 25, 2022 | Blog

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Best rental yields when renting a property

It is important to find out the rental yield you can expect when you are researching the best areas in London for investing in a property to let.

When your rental income is high, your mortgage payments, repair costs, and wear and tear will be covered by the rental income.

How is the rental yield calculated?

Your property’s rental yield refers to how much rent you can expect to receive each year.

Anywhere between 5-8% is considered a good rental yield to cover all necessary expenses while earning a reasonable return.

Divide your annual rental income by the total investment and multiply this number by 100 to calculate your rental yield. An example of a rental yield would be 5.4% if you bought a house for £200,000 and rented it for £900 a month.

Average rental yield

There is a wide variation in yields between regions. There is an average yield of 4.6% in Greater London. When investing in London, location and choice of property are very important factors.

Good rental yield

Property is always in demand in London’s rental market. In London, buy-to-let properties must work hard to return a profit due to the high number of available properties at high market prices. As a result, 6% is considered a good rental yield in London

According to Strawberry Star the following areas have the best yield:

Barking and Dagenham

  • Average rental yield: 6.4%
  • Average house price: £268,263

London’s cheapest place to buy and rent property also provides the highest rental yields in the city. Houses prices in these areas typically tend to be much more affordable.

Merton

  • Average rental yield: 6.3%
  • Average house price: £448,504

Encompassing popular areas like Wimbledon and Colliers Wood, Merton offers widespread appeal to both tenants and landlords.

Sutton

  • Average rental yield: 6.2%
  • Average house price: £323,444

Sutton offers landlords a healthy return on investment as average house prices are low but with rents averaging out high. It is a very popular residential area away from central London for families to upsize.

Redbridge

  • Average rental yield: 6.2%
  • Average house price: £339,063

Redbridge is another borough that offers families good value homes within an easy commute of central London.

Guilford

  • Average rental yield: 5.7%
  • Average house price: £354,245

Guilford is a commuter town, and one that has been attracting Londoners for quite some time, due to its beautiful homes, green space, and an excellent town centre.

Harrow

  • Average rental yield: 5.5%
  • Average house price: £368,791

Harrow, Stanmore and Pinner all have outstanding local amenities and offer tenants excellent value for money.

Newham

  • Average rental yield: 5.1%
  • Average house price: £421,081

The east London borough of Newham is currently enjoying major investment and widespread development, making it a prime choice for buyers seeking a solid investment with good prospects.

Northolt

  • Average rental yield: 5%
  • Average house price: £318,272

In the London Borough of Ealing, Northolt has excellent transport facilities to Central London and is a good prospect for families, with access to green space.

Haringey

  • Average rental yield: 4.9%
  • Average house price: £445,240

With its central location and desirability factor, Haringey is immensely popular with young London renters while offering outstanding areas for families.

Woking

  • Average rental yield: 4.8%
  • Average house price: £316,909

Growing in popularity as a commuter option, Woking offers more square feet for your money than central London and no fewer than eight golf courses to choose between.

Enfield

  • Average rental yield: 4.8%
  • Average house price: £419,333

Well-served by rail, Overground and Piccadilly line services, the northern borough of Enfield is another suburban location attracting more attention from renters in recent years.

At Lofti we have partnered with Xero to allow you to track your yield for your buy-to-let properties. Lofti allows you to track any rent in, rent out and any bills for properties using Xero integrations making it easier than ever to be able to track yield and bills.