Calculating rental yield

[Mr Sparkle]

Assuming a mortgage is required, achievable rental yield is worked out to see whether it is feasible to purchase a buy-to-let property in the first place. The idea of ongoing yield is meaningless for an owner as the capital growth is an unknown. Even if current property value can be approximated, the rental yield is misleading (unless intending to sell). For example a rising property value (assuming stable rents) would equate to a diminishing yield, and continuously high yields a sign of low capital growth. In any case, most buy-to-lets on a mortgage give you pocket money rather than income, regardless of supposedly great yields. Yields and costs start being worthwhile through the process of gearing property, rather than being evaluated on the basis of one property with a mortgage.

 

[z104]

It should also be thought of as a long term investment. Eventually the mortgage will be paid off and you will have mortgage free income minus income tax forever afterwards. Or you could just sell it and pay the capital gains tax.