How rightly put by a billionaire himself !?
When venturing into the world of property investment, a myriad of questions can come across your minds.
We at Bullishbuys have decided to help newbies or the experienced ones in search of their next smart buy with the best and professional advice they can get online. To start with, let’s discuss what are buy-to-let properties, their rental yields and other relevant information in this regard. So sit back and read on!
…“90% of millionaires got their wealth by investing in real estate”- Andrew Carnegie
Buy to let- Worth it or not?
Buy to let, as the name suggests, is a common term used in the UK where investors buy a property and rent it out to tenants to generate passive income, This type of real estate investment allows you to earn a regular rental income and generate capital growth as the property’s value increases.
In recent years, there have been a few changes in the buy-to-let world. The higher tax bills, increased stamp duty rates and growing tenant demands has led to the question of whether buy to let is still worth it? The answer to this question depends largely on the type of investment and your end goal.
Buy to let can be always worthy if you make smart choices with proper research and invest in profit-making locations with the right customers. Buy to let investors earn income through two main sources: rental yield and capital growth. Let’s take a close look at the rental yields below.
Rental yield- The what?
Whether you are a newbie or an experienced investor, calculating the rental yields is something you cannot afford to miss.
But what exactly is rental yield? Rental yield is the ROI or return of investment that investors get from the property in a year. It calculates how much money you will ultimately earn out of your investment by dividing the yearly rental income by the money invested on the property.
How is rental yield calculated?
To calculate the rental yield, you would be required to take the annual rental income of the property and divide it with the monthly rent and then multiply the value by 100. Here’s an example to paint the rosy picture.
Let’s say, the cost of property is £150,000 and the rental income is £800, then rental yield will be 6.4%.
Looks like too much math? Fret not, use our online rental yield calculator for free.
Want to Calculate Rental yield?
What is considered a good rental yield for buy to let properties in the UK?
Rental yields in the UK can fluctuate from one area to another. Additionally, the type of investors also matter. What is termed as a good rental yield for residential property may not be the same as student property.
For residential property, anything above 6% is considered to be a good investment. However, a smart rental yield for student property is said to be a minimum of 8%.
What is the average rental yield in the UK?
Wondering how to know the rental income of the property that you are yet to own? Seeking a property investment advisor is always a choice but there is also something else you can do – Research the average rental yield of the property for a more fitting insight.
As per our expert advisors, the average rental yield of buy to let properties is somewhere between 4.7% to 5.5%. It is to be noted that rental yields waver from one region to another.
Our Investment advice
It’s widely clear that rental yield is a crucial element when purchasing a buy to let property. But, it’s not the only factor. A great location, good capital growth, proper tenant demand and a well-strategized exit are equally vital elements to consider. Let’s say, you discovered a property with a good rental yield but has zero house price growth in future.
It may look tempting to give it a buy but you are sure to be troubled with no tenants for a long duration of time. Hence it is significant to hit a perfect balance between a favorable rental yield and blooming capital growth in an area with a futuristic property market.