Rental Yield: What It Is and How It’s Calculated

How to Calculate Rental Yield?

Owning and running rental properties is challenging and often stressful. Fortunately, you do not have to handle all the heavy lifting alone. As a reputable property management company in Fayetteville, GA, we can help you calculate the rental rate to maximize your return on investment. There are two types of rental yield: net and gross. Here’s how to calculate both to ease decision-making.

Gross Rental Yield

Gross rental yield refers to the percentage of returns you get before factoring in expenses. The simplest way to measure rental returns is to compare the annual rent to your property’s market value. You can get the accurate gross rental yield by dividing your yearly rental income by the current property rates and multiplying the result by 100.

Net Rental Yield

Net rental yield is more realistic, as it factors in expenses like maintenance, property taxes, and management fees. The proven method for getting your net rental yield is to subtract annual expenses from annual rent, divide the answer by the current property price, and then multiply by 100 to get the accurate percentage.

Factors that Impact Your Results

Now that you know what rental yield is and how to calculate both types, understanding the factors that impact your results is crucial to running a successful investment. Here are vital factors that can impact your rental yield results.

Location

The location of your rental property plays a crucial role in your overall return on investment. If your property is in a high-demand area with good infrastructure and vital amenities like schools, hospitals, and shopping centers, rental rates will be higher. This increases your yield and helps you make better management plans to maintain profitability. On the other hand, a shabby area can detract from your property’s yield, compromising your overall ROI.

Supply and Demand

Another factor that can affect your rental yield is supply and demand. If there are many rental properties in your area, the rent can drop to attract tenants. However, limited supply in a desirable neighborhood can increase rental prices, impacting your returns directly. With that in mind, you should look at the trajectory of availability in your area to ensure you make the most of your investment.

Market Trends

Your rental property is affected by interest rates, economic conditions, and local job markets. These trends are constantly changing, affecting rental pricing and demand. It is vital to work with a trusted property management company so that you can understand the current state of your local market and make informed decisions.

Leverage

Lastly, financing your property with a mortgage can impact your rental yield because of loan payments and interest rates. While managing your loan properly can enhance your returns, a higher debt can decrease your profits.

If you are looking to streamline your rental property and boost your return on investment (ROI), 3 Options Realty can help. Schedule a consultation with our property managers to ensure we handle all the heavy lifting, including routine inspections, maintenance, and legal compliance among other crucial responsibilities to retain tenants and the value of your property for many years to come.