A two-minute read to help you quickly determine the return on a buy-to-let property in Southampton.
If youโre looking for a property to rent out, itโs important to understand the numbers involved. You may have inherited a property and are thinking of letting it. Use the information here to identify if that is a prudent thing to do or if the capital from selling the property could be better invested.
๐ ๐ข๐ง๐ ๐ญ๐ก๐ ๐ง๐ฎ๐ฆ๐๐๐ซ๐ฌThe simplest way to work out your gross return on a rental is to estimate some numbers. You can have a browse on the property portals to get a vague sense of what properties in your budget sell for and let for. These figures change across the country so itโs important to start with your own research.
๐๐ฎ๐ข๐๐ค ๐๐ง๐ ๐๐๐ฌ๐ฒ Hereโs a simple calculation to get you the basic overview. Letโs use an example of a ยฃ150,000 property that rents out for ยฃ500 a month.
500 x 12 (months in a year) = 6,000 p.a.
Divide 6,000 by the purchase price of ยฃ150,000 = 4%.
For some investors, a 4% gross yield would be sufficient. Others look for higher but itโs all rather area dependent. Here in Southampton, we normally suggest looking to achieve between 5% and 6%.
๐๐๐๐ฎ๐๐ญ ๐ฒ๐จ๐ฎ๐ซ ๐๐๐๐ฎ๐๐ญ๐ข๐จ๐ง๐ฌ Weโve worked out your gross figures. But itโs the net figures that are the โmoney in your pocketโ numbers. To work these out, youโll need to employ a little more guesswork. Better still, ask a local property expert, like us, who deals with these things, day in, day out. Then youโll be closer to an accurate estimate. The figures you need are:
โข Solicitorsโ costs (if youโre purchasing a property)โข Landlordsโ insuranceโข General property maintenanceโข Agency feesโข End of tenancy cleaning costs
These can be off-set against your income for tax purposes.
๐๐๐ฑ๐๐ฌ, ๐๐๐ฑ๐๐ฌ, ๐๐๐ฑ๐๐ฌ Itโs reasonably straightforward to submit your tax returns yourself. They need to be done annually and submitted by the following January. Itโs recommended though to use an accountant. They will be up to date with all the latest options open to you. Not only that, they can often help in other areas, like looking at your pension or investment options.
For rental opportunities in Southampton, do get in touch with us on 02380018222. Our lettings specialists can help you consider the market and the best options out there for you.
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