Rental Yield on UK Property
Here we explain rental yield, how to calculate it, and why it matters to investors in UK property.
(First published in 2021 but updated in 2023.)
What is Rental Yield?
Rental yield is the amount of money an investor will make on their buy to let property by calculating the ratio of the rental income generated by a property to the asset’s overall costs.
Investors must ensure that there are no hidden expenses when building their property portfolio so that they can understand the real return on investment.
What is a good rental yield on a buy to let investment
According to the YourMoney website, the average UK rental yield is 3.53%. With that data in mind, investors should consider opportunities that can generate a slightly higher return – we suggest anything between 5% and 8% is a good rental yield on property investment.
Rental returns that exceed this level should be carefully considered and researched as they may be too good to be true.
Where can I achieve the best rental returns?
More affordably priced ‘Northern Powerhouse cities’ including Manchester, Liverpool, Newcastle, and Leeds offer some of the best rental returns for buy to let investors. A lower entry level coupled with a high demand makes these cities hotspots for property investment.
London has always been a popular choice for investors. However, with property prices stagnating in recent years, investors should consider commuter belt locations that offer easy access to capital including areas such as Brentwood and Chatham. Properties here are more affordable than in the centre and better yields are therefore easier to achieve.