How do I work out my rental yield?

A London landlord sent us his numbers last week, convinced his agent had got the sums wrong. Four percent gross, barely three net, on a flat worth half a million pounds. We checked. The agent was right. London was the problem.

Gross yield is your annual rent divided by the property's value. Net yield is what's left after costs. In London, both numbers are capped by the price of the postcode, no matter how well the property is managed.

Gross yield vs net yield

Here's the difference, worked through on a typical London property bought for £500,000, let at £1,750 a month:

That's not a bad agent or a badly run property. That's just what £500,000 of London bricks and mortar returns. Now here's the same sum on a Newcastle property bought for £150,000, let at £1,250 a month:

Less than a third of the capital outlay, and well over double the net return. London isn't the worse market, it's still exceptional for long term capital growth and liquidity. It just costs a lot more to earn a lot less income from.

What this means for maximising your property wealth

Building wealth through property isn't only about holding one asset in one location, it's about putting your money where it works hardest for you. For many London landlords, that means keeping a London property for long term growth while adding a North East property for income, rather than assuming everything has to sit in the capital. We sell North East properties, refurb them, and manage them, wherever you happen to live. If you want your money working harder, give us a bell.

Watch on YouTube: https://youtube.com/shorts/4d85gwGrYp4