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Average Rental Yield

Posted by geeksadmin on May 5, 2023
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When you are looking to invest in a buy-to-let property, one of the things that you are going to need to consider is your property’s average rental yield.

The reason for this is that you want to know that the money that you have invested into buying (and perhaps renovating or improving) the property is going to be worthwhile, and that you are going to see a return on that investment.

Rental yield is also something that potential lenders may want to know when it comes to considering whether or not to lend you the money to buy the property, after all, they are going to want to know that you are going to be able to repay what you have borrowed.

So, what is an average rental yield?

Average rental yieldThe average rental yield for the UK during 2023 is around the 4.75% mark. The higher yield areas are often found in the northern parts of the country.

The main reason for this is because the property prices in these areas, to buy a property, are much lower than they are further down south of the UK. Therefore, when it comes to charging rent (which can be a little below average, but not too far) this means that you are going to be seeing a great return for your initial investment.

What is a good level of rental yield?

Average rental yieldWhen it comes to rental yield, what can be classed as good or average will depend on the location of the property that you want to buy and also the expenditure that you have to invest.

As a general rule, when it comes to rental yield, around the 7% mark is going to be a good yield to aim for in a buy-to-let property.

Should I decide on a property just based on rental yield?

Average rental yield

One common mistake that people seem to make when it comes to investing in buy-to-let property, is to base their decision on the property that they are going to buy and rent out, based solely on the rental yield that they can expect to receive. Of course, it is important to make sure that you are going to see some money coming back into your bank account, but this shouldn’t form all of your decision-making.

You want to also consider whether or not it is the type of property that is going to appeal to your target tenant. You also need to think about whether or not it is going to work out to be affordable for them.

It is also important to consider your long-term plans too, is this going to be a property that you can sell on for a profit when the time is right? If not, then it might not be the right one for you.

Just because a property offers you a high yield, it doesn’t mean that it is a property that is going to be secure for you to invest in longer-term. It may be in an area that is either up and coming or perhaps is not proving to be particularly popular. Not only this, but you can also find that a property could be difficult to sell on or does not hold its value.

All of these things are just as important to keep in mind as the yield percentage.
The bottom line when it comes to choosing a rental property is to achieve a balance between a high enough rental yield to make the property purchase worthwhile, as well as a property that is going to prove to be a good investment.

 

Also Read: Best Areas for Buy to Let 

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