Buy-to-Let HMO rental yield calculator

The Buy-to-Let HMO rental yield calculator is a must have when considering the purchase of a Buy-to-Let property or HMO property. The rental yield calculator is defaulted to purchase date. However if you own or manage a portfolio this is also an excellent tool to ensure ongoing or adjusted costs are still relevant. If you’re considering a Buy-to-Let mortgage or HMO mortgage confirm whether a good investment and ROI. The calculator in itself is fairly straightforward to use and fairly self explanatory. We have added tool tips to the right of some input fields where we feel clients may be unclear. This can be used with any currency but this was primarily developed for the UK market.

How to work out yield with a rental yield calculator

The formula itself is far from complicated but, of course, you need to have a record and detail of all your outgoings. The calculator is derived from dividing the annual rental income thereafter multiplying it by 100 to confirm rental yield. Remember to pay special attention to your rental income figure. Have you paid for broadband for the year? This needs to be noted separately. Remember the rental yield figure is only as accurate as the figures input. If you don’t own the Buy-to-Let or HMO property yet it is possible to work backwards. It may be that you would like to achieve a minimum of 10% net and this may well further guide you to an HMO hotspot area.

What is Rental Yield

Rental yield is annual rental income expressed as a percentage of property value. Rental yields will vary widely across the UK with lowest yields in London Albeit that rents are exceptionally high this must be balanced with property cost. The majority of London property sales last year were for flats selling on average for £531,853. Terraced properties sold on average for £731,600, semi’s fetched £718,288. London has an average sale price of £668,569. Average rental income in London is 2.90% and is arguably at the bottom of most HMO shopping lists. While average rentals in the North West are 4.41%. Long term capital growth in London remains strong and would present a more balanced view to a lower rental yield.

Why do I need to calculate Buy-to-Let rental yield?

Forewarned is forearmed, asides from the fact that calculating yield should be first and foremost. Having a good understanding of rental yield is a good understanding of the area you are buying in to. A rental yield calculator will also endorse and confirm HMO property hotspots. Not forgetting the return on capital. The Buy-to-Let and HMO property investor is primarily interested in two things, rental yield and capital growth. In respect of an HMO a student HMO property is a far more attractive proposition than a standard HMO. These standard HMO properties are associated with a high churn/turnover of tenants and corresponding void periods. This compounded with the typical fees associated with a tenant find (replacement).

Establishing irregular rental yield costs

The fixed costs are easily identifiable such as leasehold costs, insurance premiums, agent fees and mortgage repayments. The irregular costs need further dissecting. Maintenance costs are an unknown however if your property is recently refurbished this should be fairly negligible. If you do your own maintenance then how do you quantify your time. Maintenance costs can be determined from experience and a mean figure arrived at. Maintenance hits your bottom line but irrespective it should be a top priority. Those fortunate practical individuals amongst us against those who would rather be somewhere else doing something else and getting on with what they’re good at. Further balanced against entrusting a letting agent to spend your money on preferred trades.
Further Reference: ONS House Price Index July 2021