What does property yield mean?

This yield is also referred to as the rental yield, as well as the property yield and can be considered a gross annual return on investment.

How is property yield calculated?

For example, a property with a monthly rental of £800, will give us a yearly rental income of £9,600. (800 * 12.) If the property costs £200,000, we divide £9,600 by £200,000 to give us a percentage of 0.048. To get a percentage we multiply this number by 100, giving us 4.8%. This is the gross yield, and is a quick useful metric to appraise your return on investment via rental income. This doesn't account for the value of your property increasing (capital growth). A net yield figure would include other costs such as buildings insurance, mortgage payments, letting agent fees (to find a tenant) etc.

What is a good yield?

A great good yield can be considered 5%+, with 10% being amazing. 7%+ can be considered very good, and something to aim for. In places like London this will generally be out of the picture, as large prices mean yields tend to be lower than elsewhere. There are many other factors to be considered in an investment of course, such as capital appreciate (house price growth).

What is the average rental yield in the UK?

As this varies by region, it can be more useful to group by region. Central London currently has a average yield of 2.12%, while Tyne And Wear has a yield of 5.06%.

Where does capital growth fit into this?

Capital growth - the increase in value of your property is something to take into account when making an investment. Areas with higher predicted capital growth tend to have lower yields, but this is not always the case - finding properties is both possible and of course desirable.

Is a high property yield always a good thing?

A high yield without the ability to rent the property out is no good for investor - and some areas with high yields, like historically the North East of England, have had a lower rental demand than elsewhere. This can lead to properties having longer gaps between tenants - effecting income, and potentially requiring rental prices to drop to find a tenant. We suggest you take into account the rental demand and yield when considering an investment.

Below is a list of the factors that are often judged when making buying somewhere. The order of these priorities is up to you, but as the rental demand and yield can be more accurately determined than the capital growth, we think you should prioritise these two first. As you cannot rent out a property without demand, we also think the below is the best ordered list of priorities when making an investment,

1. Rental demand
2. Property rental yield
3. Expected capital growth

Where can I find high yielding properties?

You can search property listings sites and do the calculations manually. Property Wisdom updates and calculates yields for you automatically if you wish to save time. High yield property listings is a good place to start.

What data metrics should I be considering for UK property investment?

When assessing UK property for potential investment opportunities, there is a range of data metrics to be considering in a bid to maximise returns. Below, we walk through key metrics to prioritize when making investment decisions.

Property Prices

Investing in UK property requires careful consideration of the region in which you are looking to invest. Property prices will naturally vary drastically throughout the UK so it's important to focus on locations that have growth potential and where there is sustainable long-term demand.

Maximising Property Investment Yield

For investors, it is essential to understand just how much they can expect to gain from a property investment. Many websites and calculators are available to assist investors in this regard, helping to determine the potential income they can expect to receive. However, over the course of your total investment, there are more factors to consider that could change the performance and therefore yield over the multiple years.

• Location: The location of a property can have a huge impact on the potential return of an investment. Location, such as being in an area with a good transport network or close to amenities, can result in higher rents, higher capital appreciation and could attract a more reliable tenant.

• Type of Property: The type of property that is being invested in can also have an impact on the potential return an investor may receive. Investment options range from single-family homes to high-end apartments to commercial real estate and each have their own set of advantages and disadvantages.

• Tenant turnover: It is important to consider the potential of having to replace tenants regularly. The costs associated with tenant turnover, in terms of marketing the property and administration, can be significantly more than the rent received.

• Tax Implications: The tax implications associated with property investment should also be taken into consideration. Investors are subject to UK tax laws and should ensure that they are aware of how these can impact both their current income as well as their long-term success.

• Financing: Choosing the right type of financing and creditor can also have an impact on overall return on investment. Finding the right financing option that is tailored to the individual’s financial situation is essential.

It is important to note that due to the relative stability of the UK market, property investment yields are usually higher than many other investments.

Rental yields

Before investing in a property, investors should research rental yields in the area as this can offer an indication of whether the property is likely to be profitable. The rental yield should also be taken into account when setting the purchase price of a property and investors should ensure they obtain comparative market analysis of current rental yields to ensure they are making a profitable investment.

Overall, the UK property market offers investors an exceptional opportunity to maximise their yields. By following the key principles of property investment outlined in this article, investors can effectively capitalise on attractive yields available in the UK property market and achieve financial success.

Yielding High Returns

In recent years the UK has become one of the leading countries in the world for investors looking for great returns on their investments. The housing market in particular has seen a strong increase in prices over the past few years and this trend is only expected to continue in the future. Many savvy investors are now exploring the potential of buying UK property as an investment, with attractive yields and returns available. However, for those new to property investment, understanding the market and finding the right opportunities can be daunting. In this blog post, we’ll be exploring the key factors to consider when buying UK property, and how to get the best returns from your investment.

Demand

One of the most important factors to consider when evaluating a property in the UK is the level of demand for it. Many investors look to buy in locations where there is a high demand for rental properties or those that are likely to rise in value over time. This can help to create a consistent income stream and high returns.

The best way to assess the level of demand for a property investment is to look at the local housing market. Taking a look at the rental market and local property prices are a great way to get an indication of whether or not a particular area is a desirable place to live and invest. The local housing market can also offer a range of data that can help to give an indication of future yields and returns.

Regions

The UK is a hugely diverse country, with a range of different markets and economies within it. Different regions will offer different levels of demand and returns and therefore can be a great place to focus when looking for an investment property.

London is generally viewed as the key property investment market in the UK, and with good reason. The capital has seen strong returns over the past decade and demand for rental and investment properties in London is higher than in any other region. However, many other regions of the UK are also attractive investment propositions, and a diversified portfolio of property investments in different areas can often produce strong returns.

Type of Property

The type of property that you choose to invest in will also have a big impact on your returns. The types of property you can choose from in the UK include ‘buy-to-let’ properties, serviced apartments, residential dwellings or commercial premises. Each type of property will provide different yields and offer different levels of potential returns.

Buy-to-let properties can be an attractive option for those looking for consistent rental income. As with any type of investment, it’s important to research the local market before choosing which type of property to invest in. On the other hand, serviced apartments or holiday lets can offer a potentially lucrative option for those looking for higher returns, but the prices of such properties are likely to be high. Alternatively, commercial premises are often more expensive than residential dwellings, but can also offer attractive returns with a lower entry cost.

Mortgages

Obtaining a mortgage is the most common way for individuals to purchase property in the UK, and they can be a great way to finance property investment. However, it’s essential to understand the different types of mortgages that are available, and to ensure that you get the most competitive rate possible.

Lenders in the UK tend to offer two types of mortgages in particular for property investment: buy-to-let mortgages and self-certified mortgages. Buy-to-let mortgages are specifically designed for those investing in property and come with specific lenders and criteria to be met. Self-certified mortgages offer an alternative to buy-to-let mortgages, with lenders offering more flexible terms and interest rates.

Taxes & Regulations

Property investment in the UK is subject to a range of taxes and regulations which must be taken into account when making an investment. Understanding and complying with these can be a complex process, and it’s important to work with a qualified lawyer or accountant in order to ensure that you are compliant.

Stamp Duty Land Tax is perhaps the most important tax to understand as a property investor. Depending on the type of investment you are making, this type of tax can vary. Inheritance tax is also an important consideration when investing in UK property, particularly in more high-value areas of the market. In addition, landlords in the UK have specific legal obligations to tenants, and these must be met in order to protect both your interests and those of the tenant.

Off Plan Developments

Off plan developments are becoming increasingly popular in the UK property market, and can offer an attractive investment opportunity. Investing in an off plan development involves buying a property before the property has been built, and the returns can be significantly higher than those of a standard property investment.

Investing in off plan developments involves understanding the local market and the different risks that come with off plan investments. Taking the time to research the market and the specific development you’re looking at can be a great way to minimise the risk of losing your investment.