As a property investment owner in the UK, it is crucial to understand the different financial aspects of your investment.One of the most important indicators of investment profitability is rental yield.

#{3 } In this article, Lan Shajun will take you to understand what rental yield is, how rental yield is calculated, and the average rental yield of properties across the UK rate level.

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What is rental yield?

Rental yield measures the return on investment (ROI) you can get from a rental property.It is the ratio of annual rental income to property value, expressed as a percentage.In other words, it shows how much income you can generate relative to the cost of your investment.

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How to calculate rental yield?

Rental yield is calculated by dividing the annual rental income by the property value and expressing the result as a percentage.The formula is as follows:

For example, if a property has an annual rental income of £12,000 and its value is £500,000 , the rental yield will be 2.4 %:

Rental yield = (£12,000 / £500,000) x 100% = 2.4%

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What is the difference between net rental yield and gross rental yield?

There are two types of rental yield: gross rental yield and net rental yield.

Total rental yield only considers rental income and property value.In contrast, net rental yield takes into account all costs associated with the landlord, such as property maintenance, insurance, property management fees, taxes and utilities (if not included in the rent).

So to calculate the net rental yield, you first need to subtract your annual costs from your annual rental income and divide by the property value, then multiply by 100. This can give you a clearer picture of your ROI.#{ 53}

Let's use the previous example to calculate the net rental yield. Let's say your annual expenses total £3,000. It looks like this:

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£12,000 - £3,000 = £9,000 £9,000 ÷ £500,000 = 1.8%

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Therefore, the net rental yield of the property is 1.8%. This is the benefit that is left over after taking into account all the costs associated with being a landlord.

What is the rental return rate in the UK Better

As of early 2023, the average gross rental yield for UK properties was approximately 4.76%. However, rental yields vary by location, property type and local rental market.Properties in high-demand areas with good transport links and amenities tend to charge higher rents and generate higher rental yields.

As we head into 2023, the cost of living crisis is likely to impact the costs associated with buy-to-let landlords.Including increased labor costs, increased maintenance costs, etc., these factors will also affect rental yields across the country.

# {92}So, what kind of rental return rate is considered a good rental return rate in 2023?The answer is subjective and depends on your expectations and profit goals.

As a rule of thumb, a gross rental yield of around 6% is considered a good return on investment in the UK.

Please note that a high gross rental yield does not always mean a high return on investment (ROI) as it does not take into account property maintenance, insurance and taxes and other costs.

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Average gross rental yield for properties in major UK cities

London: 4.29%

Birmingham: 5.17%

Manchester: 6.18%

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It can be seen that the rental yield in Manchester is very impressive.Manchester city center is currently undergoing extensive regeneration, and urban regeneration will increase the population and create a huge demand for housing.#{ 9}

The Northern England Revitalization Plan has catalyzed long-term investment, and a high-speed rail network will be established with London and surrounding cities. The future is bright .So it's no surprise that rents in Manchester have continued to rise significantly over the past few years.