The gap between the costs and the income from renting property is usually known as rental yield. When you are investing in a property, it is important to achieve a good return. If the income falls under your expenditure, you will lose money. So, you just need to identify the break-even point. In this situation, rental yield can be a great solution. It is a good way to measure a property’s potential rental return.
A good rental yield must have enough cash flow to cover running costs. While investing in a property, be careful to choose one that ensures a positive return. Sometimes market value properties seem more tempting to investors. But you need to remember that a property with less rental demand will provide you with less capital growth in the long run.
Rental yield is an effective way to measure the difference between income and expenditure of your investment property. A sustainable rental income is very important to cover the running cost of a rental unit. A mortgage payment is not the only cost, you have to bear after purchasing a property. Rather there are many unforeseen as well expensive costs, you need to bear after the investment. So, it is important to have sufficient cash flow from your rental property.
The rental return needs to cover all the costs including management fees, buy-to-let landlord insurance costs. All of these costs are variable and you just need to keep them in mind while calculating rental returns.