Whether you own one or multiple properties it is understandable that you will want to review how your portfolio is performing over time.
So, here are the 5 key figures for landlords worth monitoring on at least an annual basis...
This figure allows you to see where your investment sits against the local and national averages in terms of the rental income it generates as a proportion of the value.
To calculate the gross yield, take your annual rental income figure and divide it by the current property value, then multiply by 100.
Monthly rent £700 = £8,400 per annum
Property value = £200,000
Gross yield = 4.2%
This figure should hold fairly steady, assuming rental income and the property value are both rising.
If your gross yield is below the regional or national average figure, the actual monetary amount of capital growth should make up for it.
This tends to be the case in London, where yields are the lowest in the country, but capital values mean landlords usually benefit from good equity growth over time.
Average Monthly Profit From Rental Income
Your monthly expenditure will naturally vary, but average it out over the year and track how it changes. Make sure you have included all regular expenses as well as making deductions for tax.
Once you have a fairly accurate picture of the profit you’re making month on month, you can then budget and make sure the amount you take as income each month still leaves enough in the bank for periodical outgoings, such as redecoration and bigger maintenance jobs.
We happily provide free market appraisals on properties, simply call your local branch or get an instant online valuation.
Pontcanna - 02920 344 434
Cyncoed - 02920 761 999
Roath - 02920 48 48 98
We also proudly provide a local market report for Cardiff postcodes to assist you in evaluating how house prices are performing in your area.
If your capital value doesn’t seem to be keeping up with local averages, you may need to spend money on making some improvements.
We're always happy to offer honest, expert and friendly advice on how to increase your potential rent, as well as reduce void periods.
Loan to Value (LTV)
It's very important for landlords with four or more properties to keep track of how much they’re borrowing in relation to the value of their properties.
If that’s you and you’re looking to switch to a new buy-to-let product or make a new purchase, remember that your total borrowing cannot exceed 75% of the total portfolio value.
Even if you only have one or two properties, the lower the LTV, the better interest rates you should be able to secure.
So, for example, if you bought at £168,000 with a 75% LTV interest-only mortgage 5 years ago and your property is now worth £214,500, your borrowing is now at just under 60% and it may be worth remortgaging to reduce your monthly payment.
Our mortgage partner, Mortgage Scout, is on hand to give you a no-obligation portfolio review, so please don't hesitate to get in touch.
Return on Investment
This lets you see how having your money in property compares to having it in another form of financial investment or even another type of property.
Take your annual profit figure and divide it by the amount of capital you have invested in the property – that’s the deposit, purchase fees and the cost of refurbishment and other improvements.
Deposit = £50,000
Purchase costs = £5,000
Refurbishment = £10,000
Total invested = £65,000
Annual rental profit = £3,000
Annual capital growth = £10,000
(£13,000÷£65,000 x 100)
ROI = 20%
Looking at all these figures together, you’ll be able to see how much profit you’re making each month and year, how well your investment is performing against local and national averages, whether you could be making a saving on your mortgage and if you’re able to release some equity to reinvest. If you have any questions about the financing of your properties, our mortgage partners are always here to help, so do get in touch.
Want to get a LET sign outside your property quicker?
Call our team on 0290 730 887 for honest, expert and friendly advice.