Adam Wojnar - Real estate investment broker in England
Adam Wojnar

Investing in property

How to calculate the rental income?

If you own a property and are considering renting it out, it is important to have a clear idea of the expected return. By calculating the potential yield, you can assess whether renting out a property is a viable financial option. What are the key factors that will help you calculate the rental yield of your property? That is what I will try to answer in this article. If you are interested in investing in a rental property abroad, feel free to contact me to arrange a no-obligation consultation.
How to calculate rental income?

Determination of rent

An important step is to determine the right rent you can ask for your property. To make this decision, it is essential to conduct market research and find out what owners of similar properties in the area typically charge. You need to take into account the location, size of the property, nearby amenities, and other factors that can affect the rent. Remember to also include your terms and conditions, and whether the lease will be fixed-term or open-ended.

Calculate your costs

Calculate all the costs associated with renting the property. These costs will include your mortgage, insurance, taxes, maintenance, and management of the property. You should also include the cost of any repairs or improvements to the property before you rent it out. The net profit, which you find by subtracting the costs from the rent, is an important indicator of the return on your investment. You will then be able to calculate this per year, whilst factoring in any additional costs required to maintain the property to a suitable standard.

Calculate the return

To get an idea of the rental yield, you need to calculate the annual yield as follows: (annual rent / total costs) x 100. The result will give you a percentage figure that shows what percentage of your invested money you can expect to get back in one year.

What are the risks involved in calculating rental yield?

Renting out a property carries with it a certain amount of risk and uncertainty. For example, there may be periods when the property is not rented out, or unexpected repairs may occur that will increase your costs. It is important to consider these factors and have a financial buffer for any potential costs.

Professional management option

If you do not want to worry about dealing with the problems associated with renting, you may want to consider professional property management. This service will take the hassle out of finding tenants, dealing with contracts, and resolving unexpected situations that may arise. With this service, you will reduce worry, save time, and ensure the maintenance of the property continues to a suitable standard.

Thorough tenant agreements

Having a professional tenant agreement is key to reducing risk and hassle. The contract should clearly set out all the terms and conditions for both parties. This includes the length of the lease, the rent amount, rules for maintaining the property and any other information you deem important.

Consider long-term vs. short-term lease

You can also decide between a long-term and a short-term lease. A long-term rental provides a steady income, but it can be more challenging to find a long-term tenant. On the other hand, short-term rentals (for example, through Airbnb) can be more profitable, but require regular property management and maintenance.

Unsure about calculating your rental yield?

Calculating rental yield is not complicated, but it does require careful planning and analysis. Keep in mind all the key factors, which are rent, costs, risks, and tax liabilities. Professional property management and a thorough tenant agreement can make your investment easier. Be prudent and use all available information to maximise your rental yield. Are you interested in a property abroad that you would like to rent out? Feel free to contact me to arrange a no-obligation consultation. Invest your money wisely in property abroad and protect it from inflation.
Not sure how to calculate rental income?

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