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Rental Yield Calculator

by | Dec 2, 2022

Rental yield calculators: what you need to know

If you need a rental yield calculator, read on to do an accurate calculator. Rental yield calculators can be used with a properties value or the property cost and they also are great for those who are simply just confused about the topic. Simply plug in your numbers and come up with an answer straight away.

Why should you calculate rental yield?

Rental yield should be calculated because it is a metric that most landlords use to determine the amount of equity they have to put into a property in comparison to the rental income they make. Landlords can only ever make money from property in two ways, by buying and selling a property or by collecting rental income.

Rental yield calculated on predicted property value

In order to do this calculation, you must divide the rental income by the price of the property. In this calculation, you can use the predicted property value if you want. This would be the figure given by a surveyor who will visit the property and give it a value.

Rental yield calculated on property purchase price

In order to get the most accurate value when you use a rental yield calculator, you must use the property purchase price which is known as the true value of the property because this is what the property actually sold for.

Who should use a rental yield calculator?

The truth is, anyone can use a rental yield calculator if they are interested in property. However, a rental yield calculator will most likely benefit landlords and property investors the most as this is the metric used to gauge if a property is worth investing in based on the rental income it produces

Buy to let landlords

Using a rental yield calculator is important for those who are using buy to let mortgages because a lender will approve a mortgage based on whether the property is able to produce sufficient rental income. While using a rental yield calculator is not directly 

New landlords

When a landlord is buying a property for the first time, it is a good idea to make sure that the property is able to produce a profit. Using rental yield calculators are important in this case to predict profitability. As a new investor, it is important you know the figure produced by a rental yield calculator is just a prediction as there are other factors that will not be considered like stamp duty for example

Letting agents

Letting agents can use this rental yield calculator to know what the rent that should be charged in a property. For example, if there is property that a landlord wants a 4% rental yield for, the letting agent can work backwards to calculate what they would have to charge for rents when letting the property to match this figure

What is a good rental yield?

Whether this number is deemed as good or not will depend on the location of the property. For example, if you worked out how to calculate rental yield in a city like Sheffield, you may be able to get a number as high as 13%. On the other hand, because of the high property prices in somewhere like The City of London, rental yield calculations can worked out to be as low as 1% or 2%.

FAQ

How to calculate rental yield manually?

To calculate rental yield manually, divide the annual rental income by the property’s purchase price, then multiply by 100 to get a percentage. Rental Yield = (Annual Rent / Property Price) x 100

Are there any other important figures for property investments?

Other important figures for property investments include return on investment (ROI), and cash-on-cash return

What is the difference between a property manager and a letting agent?

A property manager typically oversees various aspects of a rental property, including tenant management and property maintenance. A letting agent focuses on finding and placing tenants but may not handle ongoing management tasks

How much should a property manager charge?

Property manager fees vary, but they are typically a percentage of the monthly rent, ranging from 8% to 12%

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donnell-bailey

Donnell Bailey

Property expert

Donnell is a property expert focusing on the property market, he looks at a combination of legislation, information from property managers, letting agents and market trends to produce information to help landlords.

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