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With statistics like this, it is very likely that the PRS (Private Rental Sector) will grow even more steeply over the next 5-10 years. Of course, there are lots of reasons for landlords NOT to buy a rental property; such as no mortgage relief on rental expenses (although you’re still able to offset the vast majority of your costs), 3% additional stamp duty on 2nd homes, and the rising cost of landlord administration (to further increase when the ban on charging tenants for any tenancy services comes into force on 1st June 2019), there is simply still no better way to invest your money than property!
Return on investment remains low in savings accounts and volatile in stocks & shares, accompanied by significantly more mortgage availability for landlord portfolio expansion and options to buy in SIPs or limited companies. Property has always been a long game for those prepared to do their research, budget carefully and become hands-on landlords. There are still interesting times ahead for savvy investors.
YIELD AND CAPITAL GROWTH CALCULATIONS
If a buyer pays £500,000 (Capital Value) for a property and receives a net income of £18,000 (Yield of 3.6%) the total capital outlay will be recouped in 28 years (Years Purchase).
Often for new build properties, you will have to calculate a gross yield because there are too many unknown factors at this time to give more accurate ‘net’ yield. However, we can research similar developments and make assumptions in order to get the more accurate figure, the net yield, for you to work with.
Service charges and ground rents
Landlord insurances due
Estimate of repairs for the year
= Net Rent £ after expenses
Calculate: Net Rent £ divided by Purchase Price £ x 100 = Net Yield %