A two-minute read to help you quickly determine the return on a buy-to-let property in Neath.

If you’re looking for a property to rent out, it’s important to understand the numbers involved. You may have inherited a property and are thinking of letting it. Use the information here to identify if that is a prudent thing to do or if the capital from selling the property could be better invested.

Find the numbers

The simplest way to work out your gross return on a rental is to estimate some numbers. You can have a browse on the property portals to get a vague sense of what properties in your budget sell for and let for. These figures change across the country so it’s important to start with your own research.

Quick and easy

Here’s a simple calculation to get you the basic overview. Let’s use an example of a £150,000 property that rents out for £500 a month.

500 x 12 (months in a year) = 6,000 p.a.

Divide 6,000 by the purchase price of £150,000 = 4%.

For some investors, a 4% gross yield would be sufficient. Others look for higher but it’s all rather area dependent. Here in Neath, we normally suggest looking to achieve 6.5% but it really does depend on what you're looking for - cashflow, capital growth or a mix of both. Parts of neath will offer better monthly cashflow but a lower opportunity for capital gain, whilst other areas (historically) have offered great capital gain but much less monthly cashflow. 

Deduct your deductions

We’ve worked out your gross figures. But it’s the net figures that are the ‘money in your pocket’ numbers. To work these out, you’ll need to employ a little more guesswork. Better still, ask a local property expert, like us, who deals with these things, day in, day out. Then you’ll be closer to an accurate estimate. The figures you need are:

  • Solicitors’ costs (if you’re purchasing a property)
  • Landlords’ insurance
  • General property maintenance that doesnt constitute an improvement
  • Agency fees
  • Accountants' fees if you use one
  • Unforeseen expenses
  • Annual gas safety certificates & boiler servicing

These can usually be off-set against your income for tax purposes as income expenditure.

Taxes, taxes, taxes

It’s reasonably straightforward to submit your tax returns yourself. They need to be done annually and submitted by the following January. It’s recommended though to use an accountant. Right now tax, particularly relating to Landlords, is changing and evolving every year and its important to be up to date. An accountant will be up to date with all the latest options open to you and will save you a ton of time researching and understanding the latest rules. Not only that, they can often help in other areas, like looking at your pension or investment options.

For rental opportunities in Neath, get in touch with us on 01639 631706. Our lettings specialists can help you consider the market and the best options out there for you.