If you’re a buy to let landlord/investors, there are two ways to make money from your propertys. Firstly, through any increase in the value of the property you buy. Secondly, through the rent you receive from tenants. Balancing these two factors is key to finding a good rental yield. In this guide, we’ll cover what rental yield is, why it’s important – and how you can find a good rental yield for your property.
What is rental yield?
Rental yield is how much you could expect to receive in rent each year from your buy to let investment. Rental yield is expressed as a percentage – reflecting your rental income against the property’s market value. While calculating rental yield can give you an indication of whether investing in a buy-to-let property is worth it, there’s other factors to consider. You’ll also need to think about whether there might be any problem finding tenants, collecting rent or void periods, for example. Then, there’s capital growth – the value by which your property is set to increase over time. All of these can impact your decision on whether a property is worth your investment.
How do you calculate rental yield?
- Times your monthly rental income by 12 to find your annual income.
- Divide that figure by the property purchase price or current value.
- Then, multiply the figure by 100. The end figure is your gross rental yield as a percentage.
EXAMPLE:
A property purchase price is RM180,000.00
current rental income is RM900 a month, the total annual rental income would be RM10,800.00 the total annual rental income would be RM10,800.00
This would give a rental yield of 6%, 10,800.00 divided by 180,000 is 0.06.
What is a good rental yield for an investment property?
Everyone aims to achieve a high rental yield, but the average yield can vary depending on factors such as location, area, and property type. A common question is, “What is considered a good rental yield in Malaysia?” Generally, a rental yield of 4-5% is considered decent and above average.
However, according to data from Globalpropertyguide, the current average rental yield in Malaysia is 3.72%. If your rental yield falls within this range or exceeds it, you’re already looking at a good return on your investment.
That being said, there is no universally “best” rental yield. While a higher yield may be appealing, it’s essential to take into account other important factors, such as the property’s costs, market conditions, and local economic trends, to ensure a well-rounded and informed investment decision. For assistance in finding properties with strong rental yields and solid ROI, please contact LELONGGUYS at 6012-6184353.
