How to work out the return on your buy-to-let investment
Remember, if you are buying with a mortgage, rent-to-property price yield will not be the return you get.
To work out your annual return on investment subtract your annual mortgage cost from your annual rent and then work this sum out as a percentage of the deposit you put down.
For a £100,000 property that could rent for £500 per month, you could need a £25k deposit and roughly £2,000 in buying costs.
£75k mortgage at 5% interest rate = £312.50
£500 rental income x 12 = £6,000
Difference = £2,250
Deposit + buying costs = £27k
Annual return = 8.3%
Don't forget tax, maintenance costs and other landlord expenses will eat into that return.
To calculate the percentage gross rental yield:-
(total income per year ÷ the value of the property) x 100 = % gross yield
