Understanding and Calculating Your Rental Yield
The Importance of Rental Yield
As an investor, it's important to understand the Annual Rental Income and Rental Yield of your investment properties before you actually invest in them (it forms part of your due diligence). It's also good practice to review these on an ongoing basis as property values and rental levels change, over time, and as you continuously re-assess your property portfolio.
There is a simple formula that you can use, which we'll go through in a moment. However, for simplicity, we've created a simple online calculator that does the work for you, whenever you need it (see the form on the right).
Just bookmark this page and you can come back at any time! (You may want to do the same with our Return on Investment Calculator)
For those of you wishing to understand how these figures are calculated, here's the information you need;
Annual Rental Income
This is pretty straight forward. Your Annual Rental Income (ARI) is your Monthly Rent (MR) multiplied by 12 (the number of months in a year).
The formula is: MR (£) x 12 = ARI (£)
Your Rental Yield (YR) is the Annual Rental Income you get on your property, as a percentage of the purchase price. It's calculated by taking your Annual Rental Income (ARI), dividing by the Purchase Price (PP) of the property and multiplying the answer by 100 to give a percentage.
The formula is: ARI (£) / PP (£) x 100 = RY (£)
If none of that makes any real sense to you, use the calculator on the right.