If you are planning on buying a property in the East Midlands with the intention of letting it out to tenants, one of your priorities is likely to be seeking out properties with a good yield. Read more to find out what is considered a ‘good’ rental yield and the highest rental yields in the East Midlands.
What is rental yield and why is it important?
The financial return you can get from a rental property is known as the rental yield. This can be determined by dividing your annual rental revenue by the overall value of the property, which includes the cost of the original purchase as well as any upgrades you have done or will make in the future.
So, what is a good rental yield?
According to research by Zoopla, the average gross rental yield across the UK for a new purchase is 4.86%. While it’s a good benchmark figure, yields can vary widely from region to region, and even from street to street.
Remember that initial yields are not fixed and are only half the story. As rents rise, the yield against your purchase price also increases, leaving you with more spare cash every month. Landlords who bought a rental property in early 2020 have seen the market soar, with average rent increases of 15% driven by a shortage of supply.
When you factor in the general upward trajectory of house prices, you can see that increases in capital value and yields continue to out-perform any UK savings account.
Average rental yields in the East Midlands
According to Zoopla, the highest yielding areas in the East Midlands are:
- City of Nottingham – 6.49% gross rental yield
- Boston District – 6.01% gross rental yield
- Mansfield District – 6.00% rental yield
Factors that influence rental yield
1. Location: the location of a property within the UK can have a significant impact on rental yields as areas with high demand for rental properties will have higher yields due to increased competition.
2. Property type and condition: the type of property being rented will also influence rental yields. Properties such as houses, flats and apartments will all have different levels of rental yields due to the different types of tenants they attract and the demand for these types of properties.
3. Rent: the amount of rent a landlord charges will also have an effect on rental yields as higher rent will generally result in higher yields, but this must be balanced against the possibility of the property being left empty if the rent is too high.
Maximising rental yields
1. Research rental prices in the local area: Landlords should research rental prices in the local area to ensure they are pricing their rental property competitively and maximising their rental yield.
2. Make improvements to the property: Landlords should consider making improvements to the property such as modernising facilities and making repairs to ensure they are providing a desirable rental property that can fetch a higher rental price.
3. Utilise a professional letting agent: Enlisting the services of a professional letting agent can help landlords ensure they are maximising their rental yield by providing advice on the best rental prices and finding suitable tenants quickly.
Get in touch with Belvoir
Thinking of renting out a property? Get in touch with someone at Belvoir today.
