Considering investing in a property in the UK? You may want to keep in mind many factors, such as the location of the property, its size, neighbourhood, and nearby amenities. But one factor that you must never ignore is its ROI. Always think whether it’s a good investment for you or not.
Honestly, the UK never disappoints when it comes to real estate investments. But how much ROI you make depends on your property investment decision. Rental yield, for example, is highly popular in the UK. A huge section of the investors finds it profitable to invest in properties that they further rent out. In fact, the UK has a rental yield of approximately 7%. Investors consider buy-to-let properties as fruitful propositions because of their high returns. For property buyers, you can click on SPFC.
Calculating ROI on a property
Suppose you purchase a property in the outskirts for £140,000. You immediately rent out the property and ask for a monthly rent of £600. This means your yield is 5.1%. Here’s how:
600 x 12 = 7200
7200/140,000 = 0.051
0.051 x 100 = 5.1%
The trick here is you don’t sell the property at the end of two years. It takes two years to cover your investment. Whatever you earn after that is your profit. Let’s take a look at the top five cities in the UK with the highest ROI on properties:
I. Manchester – The average property value is £202,734, while the average annual rent is £14,784. Therefore, the average ROI is 7.29%.
ii. Nottingham – The average property value is £226,877, while the average annual rent is £16,512. Therefore, the average ROI is 7.28%.
iii. Portsmouth – The average property value is £242,330, while the average annual rent is £17,124. Therefore, the average ROI is 7.07%.
iv. Bristol – The average property value is £328,466, while the average annual rent is £22,596. Therefore, the average ROI is 6.88%.
v. Birmingham – The average property value is £205,703, while the average annual rent is £13,740. Therefore, the average ROI is 6.47%.
On the other hand, the average ROI on properties with mortgages is 8.8%. But experts believe it’s risky to invest in such properties. There is no guarantee that you will end up making money out of the deal. The average ROI on properties without mortgages much lower. It is 4.6% only. That’s because there are little to no risks in buying these properties.