Buy to let property yields
It can be important to understand how buy to let property yields work. Typically, as a landlord, you’ll be looking to work out your buy to let property expected return.
There are two key things you’ll need to consider with buy to let property yields, these are:
- Rental Yield
- Capital Growth
In some cases landlords tend to look at one of the above areas. However, it’s a good idea to have an understanding of how they both work. If you need any advice about buy to let property yields, one of our adviser will be happy to chat things over.
Rental Yield is a term used to describe the return you get from your property investment in terms of rental income. Therefore, when buy to let investors compare different rental properties, they calculate the buy to let property rental yields for each property. This helps you to understand which buy to let property provides a better return.
Perhaps, the easiest way to calculate your buy to let property yield is to divide your expected annual rent by the market value of the property. Then multiply this result by 100. Doing this helps calculates your percentage rental yield. You can then compare properties using your calculated rental yield and work out which is best.
Rental Yields are important when calculating your maximum mortgage potential with a buy to let mortgage. Most buy to let mortgages will take the rental income into account when calculating the amount of mortgage you can have, but not all buy to let mortgages operate in the same way.
Next, you need to consider what you might expect in terms of capital appreciation. Capital appreciation is the amount your property increases by over a period of time. Remember though that the value of property can fall as well as rise and nothing is guaranteed.