What Type of Property Has a Good Rental Yield?

How To Work Out Property Yield

To work out whether a property offers the best net return, an investor needs to know how to calculate the rental yield of a property.

The formula to calculate a rental yield is: Annual Rental Income ÷ Property Value × 100

A property’s annual rental income is often a projection, especially when calculating the yield for an off-plan development. When coming to calculate property yield, an investor must first ensure the forecast rents are both achievable and realistic for the best outcome.

If ever unsure of whether an area or a buy-to-let has a good rental yield, it is best to seek aid from experts in the field. Using an investment agency instead of going alone helps landlords make more informed and secure decisions, down to market insight and due diligence.

Click here to use the CityRise property yield calculator.

What Type of Property Has a Good Rental Yield?

Off-plan developments are often the highest-yielding properties an investor can find on the market.

While investors are often hesitant at the idea of buying off-plan, they offer instant equity upon the completion of the development. Not to mention high rental prices. There are, however, a few more things to consider than usual when investing in off-plan properties. This can range from the desirability and demand of the location to the quality of the build and the reputation of the developer. But the right insight can help steer investors in the right direction.

Purchasing the property below its market value is certainly one of the main benefits of buying off-plan. Sometimes, investors may be able to secure a property 10-15% below the market value, when purchasing or during construction. This drops to 5-10% as the property nears completion. Off-plan properties generally need less maintenance as appliances are newly fitted and the build will be completed to a high standard, with a new-build warranty in place. Therefore, investors can maximise the return on investment.

Lower buying prices and high rental prices go hand-in-hand with off-plan investments. Due to their high specification and lower utility bills, rental demand is high. Investors are assured to experience a good rental yield on off-plan properties and a swift return on their investment. This is due to the desirability of the areas they are built in – and for new-build homes themselves.