Advice to new investors

Either they‟re investing for small rental returns in an area with large capital growth or they‟re investing in an area and property known to produce a high income.

Either way rental yields are crucial to measuring their success and need to be fully understood and properly calculated.

They come in two forms – gross and net – and whilst neither are 100 per cent accurate, they are the most useful barometer a landlord can have.

Paul Marchant of leading UK lettings specialist Belvoir, which has an office in Leamington Spa, said: “Newcomers to the buy-to-let market must be prepared to look in detail at the expected yield‟ from a property and have realistic expectations for the return on their investment.

“Whilst we acknowledge that some property purchases will always be made by the heart, it is essential to be ruled by your head. Quick and easy rental yield calculations will provide just that and at Belvoir, our staff are always happy to advise landlords on how to formulate them.”

Belvoir has a structured investment advice plan which it presents to all prospective landlords and offers an explanation of rental yields:

Gross Rental Yield: What is it?

In short it‟s the expected annual rental income of a property expressed as a percentage of the total property value.

Why is it useful?

Whilst not being wholly accurate in terms of what you receive, it is easy to formulate before purchase, provides a good yardstick for comparison and increases the likelihood of a successful venture.

Net rental Yield: What is it?

In short it is a post-purchase calculation of the total rent received minus the expenses the property incurs expressed as a percentage of the total property value.

Why is it useful?

If the figures for expenses are correct this is a very easy way to monitor the profitability of your purchase.

Paul Marchant added: “A landlord is more likely to be successful if they adopt a professional approach.

“At Belvoir, we recommend all our landlords conduct regular rental yield calculations and store their results on an excel spreadsheet for year on year analysis.

“It is good practice and something we are happy to help with and advise on.

“In this current economic climate, buy-to-let investors have the potential to achieve much higher returns than by putting their funds into a traditional bank account with very low interest rates.

“At Belvoir we always strive to achieve the best return for our landlords and we can offer friendly and expert advice on how to maximise yields.” If you are a prospective landlord who is keen to know more about rental yield information or any other aspect of buy-to-let investment in the area, then please call Belvoir on 01926 422251 or email [email protected].

Manager Paul Marchant and the Leamington Spa office staff at Belvoir Lettings.