As with any more niche investment, however, there are specific rules around taxation – and you might find it harder to get a mortgage. Currently, the best rental yields in the UK can be found in Nottingham – which achieves an average rental yield of up to 12%. To calculate rental yield you will need to know the purchase price of the property, or a current market value, and the annual rental income that you expect to receive. The best rental yields in London can be found in the E12 postcode with 6.04% yields on average. The lowest is AL5 in St Albans, where the average buying price is £800,000 and the average rent is £1,300, producing a yield of only 1.95 per cent. Liverpool is a hot spot for landlords looking to capitalise on high rental yields. Aside from the absence of London areas, there is one other surprising point to note in this table, which is the appearance of multiple Liverpool postcodes. Buyers should expect the rental yields of new properties to be lower than the gross rental yields published by the Global Property Guide. Higher house prices have a knock-on effect on rental yields in London. Rental yield calculator. Basically, if a property has a rental rate of $1,500/month ($18,000 annually), and $11,000 in annual expenses, then the investment property’s annual cash flow will be $7,000, which is a positive cash flow. Buy-to-let investors often talk about rental yield, as this is an indicator of whether the properties are making money or not. The table below illustrates the Top 50 areas for buy-to-let rental yields in the United Kingdom. The property value is £750,000. Our London rental yield map is a resource for buy-to-let investors and landlords. How to Calculate Rental Yield for UK Properties. You calculate a commercial property rental yield by dividing the annual income by the property’s value and then multiplying that figure by 100. We focus on the premier city, where to-buy-let investments are likely to make most sense. Which areas have the best rental yields? 2. Liverpool and Kilmarnock post codes came up most frequently, with six entries in the top 50 each. 5 Liverpool postcodes make up the Top 20 best yield areas. A HomeAway report suggested that UK holiday rental owners earn an average of £12,750 in gross annual income per unit, with total expenditures of just £6,000. Many owners exceed this but you have to work hard and market your holiday let the right way. Gross rental yields vary enormously from one country to another. Rental income is the rent you get from your tenants. To work out rental yield you apply this simple rental yield formula: Rental yield = (Monthly rental income x 12) ÷ Property value. We’ve broken down how you use this formula to calculate rental yield below: Take the monthly rental income amount or expected rental income and multiply it by 12 By analysing property across London, we've computed the median rental price for 1 and 2 bedroom flats and compared it to the sales valuations for the same sorts of properties when offered for sale. The best rental yields in the UK by area in 2019 Earlier this year we reported on the Property Investment hot-spots for the UK . What are the average rental yields in the UK? The typical gross yield in London is currently 3.7%, which means that for now, property in other areas of the UK are outperforming London based on rental yields. Gross rental yield is considered ideal if it's somewhere between 7 and 9%, so the gross rental yield for that property is good. Buy-to-Let tracker map. Rental income. The buy-to-let London yield map is updated daily and provides rental yield data at street level. For property investment In property investing, the annual rental yield that you receive from your investment property is one of the most important factors in determining your total return. Calculating Property/Capital Values Using Rental Income • Student lettings may achieve the highest rental yields but will incur other costs. The rental yield calculator allows you to work out the gross and net rental yields on any individual property or the entire portfolio of your lettings business. We detailed which areas in the UK were seeing investment figures rising for both rental yield and capital appreciation, outstripping the national averages, which can be seen in our Rental Index. Rental properties can round out an investment portfolio and create an ongoing income stream. With an average property price of just £268,263, property in the Borough of Barking and Dagenham has generated an average £329 pw rental income, giving a rental yield of 6.4%. This includes any payments for: the use of furniture; charges for additional services you provide such as: London's cheapest place to buy and rent property also provides the best rental yields in the city. So like we said, it’s a measure of the return on rental property investment. Obviously, rental yields differ from region to region. In regional areas, gross rental yield can be 5%-plus. An income of $27,360 minus the cost of $4,842 works out to $22,518 in rental income after expenses. $22,518 divided by the property value of $300,000 equals a rental yield of 7.5 percent. This is your ‘property allowance’. That’s an immediate 100% gross profit! In the long term a good rental yield is much more important than securing a property at below market value. Contact HMRC if your income from property rental is between £1,000 and £2,500 a year. In my experience, a good rental yield for BTL property is 4-5% or more. The best of the ‘worst’ is in Hampstead Heath, N6, where the average asking price is lower than in other areas of the worst 10, at £865,000, and average asking rent is £1,614, making the buy-to-let yield 2.2%. Rental yield gives you an indication of a property’s return on investment from rent. It is by having a good rental return on a property that the long-term success of the investment is assured. The annual rental income is £22,500, meaning the property produces a rental yield of 3pc. Merton Rental yield… Related: What Is a Good Return on Real Estate Investment? Any property with yields below this level could risk not bringing in enough income to cover running costs, such as ongoing maintenance, mortgage payments and those unforeseen, expensive problems that inevitably crop up when investing in a property. For more advice about rental yields, speak to a member of our buy-to-let team. Amount of rental income by your total investment – or use a yield calculator allows... 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