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How To Calculate BTL Yield

BTL Property Yields?

A regular question at the moment from clients is how do I work out property yields…

 

✅Gross Yield

This is your Annual Rent (AR) divided by the property Purchase Price (PP) then multiplied by 100 to get your percentage.

Example…

◾AR £8,000 divided by PP £125,000 = 0.064

◾0.064 x 100 = 6.4% Gross Yield

 

✅Net Yield

This is where you also take into account expenses associated with the property.

In this case we take your Annual Rent (AR) then deduct Annual Expenses (AE) and divide by the property Purchase Price (PP) then multiplied by 100 to get your percentage.

Example…

Annual Expenses include mortgage payment, letting agents fees, insurance, other costs associated with the property including maintenance and repairs. Lets assume a figure of £5,000 for AE.

◾AR £8,000 deduct AE £5,000 = £3,000

◾£3,000 divided by PP £125,000 = 0.024

◾0.024 x 100 = 2.4% Net Yield

 

✅Below Market Value (BMV)

The BMV is the discount that you have negotiated on a property.

Example…

If we take a Property Value (PV) of £125,000 and deduct a Purchase Price (PP) that’s been agreed at £95,000.

◾PV £125,000 deduct PP £95,000 = £30,000

◾£30,000 divided PV £125,000 = 0.24

◾0.24 x 100 = 24% BMV

 

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