How to Calculate the Rental Return on Your Buy-to-

A two-minute read to help you quickly determine the return on a buy-to-let property in Sidcup.


If you’re looking for a property to rent out, it’s important to understand the numbers involved.
You may have inherited a property and are thinking of letting it. Use the information here to
identify if that is a prudent thing to do or if the capital from selling the property could be better
invested.


Find the numbers
The simplest way to work out your gross return on a rental is to estimate some numbers. You can
have a browse on the property portals to get a vague sense of what properties in your budget sell
for and let for. These figures change across the country so it’s important to start with your own
research.


Quick and easy
Here’s a simple calculation to get you the basic overview. Let’s use an example of a £150,000
property that rents out for £500 a month.


500 x 12 (months in a year) = 6,000 p.a.


Divide 6,000 by the purchase price of £150,000 = 4%.


For some investors, a 4% gross yield would be sufficient. Others look for higher but it’s all rather
area dependent. Here in Sidcup, we normally suggest looking to achieve between 3% and 5%.


Deduct your deductions
We’ve worked out your gross figures. But it’s the net figures that are the ‘money in your pocket’
numbers. To work these out, you’ll need to employ a little more guesswork. Better still, ask a local
property expert, like us, who deals with these things, day in, day out. Then you’ll be closer to an
accurate estimate. The figures you need are:

  • Solicitors’ costs (if you’re purchasing a property)
  • Landlords’ insurance
  • General property maintenance
  • Agency fees
  • End of tenancy cleaning costs


These can be off-set against your income for tax purposes.


Taxes, taxes, taxes


It’s reasonably straightforward to submit your tax returns yourself. They need to be done annually
and submitted by the following January. It’s recommended though to use an accountant. They will
be up to date with all the latest options open to you. Not only that, they can often help in other
areas, like looking at your pension or investment options.


For rental opportunities in Sidcup, get in touch with us on 020 8269 6600. Our lettings specialists
can help you consider the market and the best options out there for you.


COPYRIGHT DREWERY PROPERTY CONSULTANTS 2021

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Speak to me: If you`d like to have a chat about anything in this article, drop me an email at d.dirkx@drewery.co.uk - I`d love to hear from you.

David Dirkx
Residential Lettings Manager
07956 931975
d.dirkx@drewery.co.uk

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