What return I can expect

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