Friday Question And Answer Video [#20]

This question was from Zoopla User z2_NjU0NTQ3cmFt.

What Type Of Rental Properties Offer The Best Yield

Video: What Type Of Rental Properties Offer The Best Yield



More property related questions from Zoopla this week answered by Jonathan Rolande

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Video Transcription

Hello my name is Jonathan Rolande from House Buy Fast and I have a question Zoopla.co.uk, from somebody in Hayes. What type of rental properties offer the best yield? Just for anybody that doesn’t understand the yield is the amount of money you have returned on your investments, so if you bought something for £100,000 and it’s bringing in £10,000 a year that’s a 10% yield.

Traditionally commercial properties bring in good yields and very often they will be trouble free, well in theory, so if you have a commercial shop or office building and factory even and you can rent that out very often the yield on those are 10%. The yield tends to drop lower for businesses that are more secure or as they are known in commercial terms blue-chip.

So an extremely profitable company will offer a worse yield than something that is a little more of a gamble as the company could go bust owing rent or not being a very good tenant in the future, so as I say something around 10% is normal for commercial.

Another good yielding investment property would be an HMO or house in multiple occupations they can be anything up to 15% to 20% based on value, so compared to what you have to pay for the property you are going to get a much better income, the reason for that is you’re going to have to work for it.

HMO’s tend to have a higher vacant rate, also people going off without paying. You will also tend to get stuck with a few bills as well so you might have to pay council tax or more insurance for the property because it is a HMO. If you go for a normal buy-to-let property this would be something such as a 1 bedroom flat or 3 bedroom house that you let to one family, probably looking at around 7% as a general rule of thumb.

So all of those much better than you would probably be able to get in the bank because interest rates are so low and of course there is the hope that capital prices, the value of the property itself in other words could go up, but of course as with everything it could go down as well so you have to factor that in.

So I hope that helps and good luck with the purchase.

Jonathan Rolande
Author:

Starting in property agency in 1988, I moved into lettings during the early 1990s and in 1998 acquired an estate and letting agency business which is still running successfully. During this time I have helped many hundreds of sellers and purchasers within the property industry, a field in which I am now specialising. Founding member of The National Association of Property Buyers.

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