The primary aim of investing in a buy-to-let property is income generation. The easiest way to calculate how much income a property generates is the rental yield and this is the annual sum expected in rent expressed as a percentage of the property's purchase price.
The rental yield can be used to compare buying opportunities and yields in different areas based on the asking rent and property's market value. Calculating the rental yield can be a good way of working out what return to expect from your buy-to-let investment.
As a rule of thumb, rental yield between 5% and 8% is considered profitable. However, different parts of the country can deliver significantly higher or lower returns. It is worth bearing in mind that yields can be lower in areas where the expected house price growth is highest, such as in London. This is because the potential for capital gains in the region pushes sale prices up, while rent levels are less affected.
Similarly, yields in places like Bristol, Oxford, Cambridge, and Manchester have been ranked high, due mainly to the presence of universities.
You can use the tool below to calculate your expected percentage yield.
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