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
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 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%.