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Rental Yield Calculator

Use this calculator to estimate the gross rental yield on your investment property. Gross rental yield is a measure of the return on investment for a property before accounting for any operating expenses.

function calculateRentalYield() { var purchasePrice = document.getElementById("purchasePrice").value; var annualRent = document.getElementById("annualRent").value; var resultDiv = document.getElementById("result"); resultDiv.innerHTML = ""; // Clear previous results if (purchasePrice === "" || annualRent === "") { resultDiv.innerHTML = "Please enter values for both fields."; return; } var purchasePriceNum = parseFloat(purchasePrice); var annualRentNum = parseFloat(annualRent); if (isNaN(purchasePriceNum) || isNaN(annualRentNum)) { resultDiv.innerHTML = "Please enter valid numbers."; return; } if (purchasePriceNum <= 0) { resultDiv.innerHTML = "Property purchase price must be greater than zero."; return; } if (annualRentNum < 0) { resultDiv.innerHTML = "Annual rental income cannot be negative."; return; } var grossYield = (annualRentNum / purchasePriceNum) * 100; resultDiv.innerHTML = "Gross Rental Yield: " + grossYield.toFixed(2) + "%"; }

Understanding Gross Rental Yield

Gross rental yield is a fundamental metric for property investors, offering a quick snapshot of a property's income-generating potential relative to its purchase price. It's calculated by dividing the total annual rental income a property generates by its total purchase price and expressing this as a percentage. The formula is straightforward:

Gross Rental Yield = (Annual Rental Income / Property Purchase Price) x 100

For example, if you purchase a property for £250,000 and it generates an annual rental income of £15,000, the gross rental yield would be:

(£15,000 / £250,000) x 100 = 6%

This 6% indicates that the property is expected to return 6% of its purchase price in rental income each year, before any expenses are considered. It's important to note that 'gross' means this calculation does not deduct costs such as mortgage interest, property management fees, maintenance, insurance, voids (periods when the property is unoccupied), or council tax.

While gross rental yield is a useful starting point for comparing different investment opportunities, it's crucial to also consider the net rental yield. Net rental yield takes into account the operating expenses associated with owning and letting a property, providing a more accurate picture of the actual profit you can expect to make. A property with a high gross yield might still offer a lower net yield if its running costs are substantial.

When analysing potential investments, consider properties that offer a competitive gross rental yield in their local market. Benchmarking against similar properties can help you identify good value. However, always perform a thorough due diligence and calculate the net yield to make an informed investment decision.

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