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Lettings Direct - Letting Agents, Property Management Specialists and Buy to Let Experts.

Property Investment Yield

What is Property Investment Yield?

Yield is the annual return you get on an investment against the purchase price. An example of a yield would be as follows:

You buy a house for say, £200,000 and you receive £1200 pcm rent - the yield would be calculated as follows:

£1200 (rent pcm) x 12 = £14,400 rent per year

 / £200,000 (purchase price)

 x 100 (for percentage) = 7.2% yield

What Yield some I look to achieve?

This is always a difficult one to answer - with interest rates being so low, then anything above 1/2% is a bonus, but as an Investor, we would not recommend you look at anything below 5% yield.

When would I consider anything with a lower Yield?

Again, a matter of choice, but sometimes you have to weigh up your "Return on Investment" or RIO as we call it - for example, if the property could facilitate a leverage type of deal, whereby your investment was substantially lower, then this would give a much greater ROI - this used to be common place with cash back deals that developers used to offer.

Another example would be if the property was a "Refurbishment" which you were looking to "flip" for a nice profit, once it was completed - always the danger with "flipping" is will the property sell once the works have been done, therefore research beforehand is crucial or you could be supporting a property you didn't intend to keep or selling at a much lower price.