Property Investor Files: A Simple Explanation of Rental Yield

Becoming a property investor can be exciting, daunting and profitable in equal measure. Making a profit through rental income is an excellent way of creating healthy cash flow, as well as potentially gaining equity through capital growth. But there are quite a few factors to consider before diving into the world of being a landlord. One of the most basic parts of the investment equation is understanding the concept and specifics of “rental yield”.

If you put your investment in the hands of a professional property management company, they’ll be able to calculate the rental yield to keep you profitable, while keeping your tenants happy and making sure you have ample funds to keep up regular and emergency maintenance. For a new investor, having a trusted property management company is vital to not only your income, but also your peace of mind. Rochester NY has become an excellent place for new and experienced investors to purchase a house or apartment and rent it out. In terms of professional rental property management, Rochester NY has some excellent companies with local knowledge. Below, an expert explains rental yield: how it’s calculated and why it’s so important to understand.

The Calculation

In simple terms, rental yield is the amount of money you make from rent once all the relevant associated costs are deducted. It’s a vital indicator as to whether your investment can remain profitable or become a millstone around your neck.

Gross yield is the amount of annual rent collected before any deductions.

Net yield is the amount after the costs of running the property are deducted. (These include things like maintenance and repair costs, and monthly management fees.)

What Factors Affect it?

There are myriad things that can and do affect how much income a property yields. They aren’t always obvious, which is why it’s so important to place your investment in the hands of rental property management (Rochester NY locals always know best!). Some of the factors that can affect it include the following.

The location: Even within a city, there will be variation between suburbs as to the price of rents that can be achieved. You’ll obviously be aiming for a higher rent in a more affluent suburb and a lower rent in the more affordable suburbs.

The type: Some properties attract higher rents than others; for example, a large house with a swimming pool, garden and luxury appointments will get more rent than a basic apartment with not a lot of amenities.

Expenses: There can be a huge variation in the cost of outgoings, including how much upkeep is needed, the cost of insurances, and agent fees. (Rental property management Rochester NY will vary slightly from agent to agent, but is relatively standard.)

Any and all of these factors can be wildly different, so it’s very important you don’t think it’s a one size fits all equation. Costs should always be calculated on an individual basis.

Why is Understanding Rental Yield Important?

Not only is it important, it’s actually one of the key metrics of running a profitable property investment. It affects almost every current and future decision if you’re to be successful.

A higher yield means a healthy cash flow, which defines whether you’re actually making a profit — the bottom line of being a feasible business prospect. It helps you to understand if and when it’s time to review the rent to meet the market, and, more importantly, if it’s working for your ongoing investment goals. In some cases you may be better placed investing in a different type of property or a different area altogether.

Professional rental property management Rochester NY will not only take over the day-to-day operational and administrative aspects of running your investment, they should also be able to advise on the long-term profitability, by analysing data against the wider market. That’s why it’s so important to choose wisely and ensure you’re confident in a company or individual’s ability to provide relevant, informed advice — not only in the present, but for many years ahead.

Author Plate

Danny Torres is from Torres Turn Key, a property management company in Rochester NY with more than ten years’ experience providing a holistic service for both domestic and international investors. When it comes to rental property management, Rochester NY investors can rest assured they are in good hands. The city is one of the most exciting places to invest in both commercial and residential properties and the company brings together a host of experience and specialist knowledge to build long-term relationships and create maximum value and benefit for their customers.