When looking at a buy-to-let property, the headline rental yield can sound appealing.  But the figure that really matters is what is left after your costs have been taken into account.  That is the difference between gross yield and net yield.

Gross yield is only the starting point

Gross yield looks at the annual rent compared with the purchase price of the property.  For example, if a property costs £200,000 and produces £12,000 a year in rent, the gross yield is 6%.  It is a useful way to compare different properties, but it does not tell you what you will actually earn.

Net yield gives you the clearer picture

Your net yield takes into account the costs involved in owning and running the property.  These may include:

• Mortgage payments and interest
• Letting and management fees
• Landlord insurance
• Maintenance and repairs
• Safety certificates and compliance costs
• Periods when the property is empty
• Tax and accounting costs

Once these are deducted, the actual return can look very different from the headline figure.

Work from the real numbers

A property may appear to offer a strong return on paper, but that does not always mean it is the right investment.  Before buying, it is important to look at the full picture.

What rent is realistically achievable?

What are the ongoing costs?

Will the property need work?

How much could future maintenance cost?

How will the purchase be financed?

Looking at all of these figures before committing can help you avoid surprises further down the line.

Location and property type still matter

Some areas can offer stronger rental yields because purchase prices are lower while tenant demand remains healthy.  The type of property can also make a difference.  A well located family home, apartment, HMO or smaller terrace can all perform differently depending on local demand, achievable rent and purchase price.  This is why it is important to assess each investment individually rather than relying on national averages alone.

Thinking about investing?

If you are considering buying a rental property, speak to the Richard Kendall Estate Agent rental team before you commit.  We can give you an idea of the achievable monthly rent, local tenant demand and how the property may perform as a rental investment.  If you are already one of our managed landlords and are thinking about adding to your portfolio, get in touch with us. We are always happy to help you look at the figures before you make your next move.

Talk to our lettings team about managing your investment returns