Property Yields

Buy-to-let

Property is recognized as one of the safest long term investments around. Over the years, there has been a notable increase in the number of people buying-to-let. Some people choose to make a living out of it, whilst others just invest in one or two properties as a pension. Even if property prices fall, you can still make money from your buy-to-let property, providing you look at it as a medium to long-term investment and don't decide to sell the property during a downturn.

Some mortgage providers offer products that are specially designed for those buying a property to let. Many of these products are only available through specialist mortgage brokers, so ask if we know of any special products available.

Before investing in a buy-to-let property you have to think very carefully about the type of tenants you are likely to get in the area you plan to buy. You must be sure that your investment will pay off. When targeting tenants, ensure the property is decorated and possibly furnished in a style that will suit their needs and the rent you plan to charge. As a rule, tenants like to be near shops and other amenities and good proximity to transport links is always important.

Do your sums before committing to a buy-to-let property.

To calculate the gross rental yield you could achieve use the Gross yield formula:

(Total Annual Income)/(Value of Porperty)*100 = Gross yield

To calculate the net yield you could achieve:

(Total Annual Income - Annual Running Costs)/(Value of Property)*100 = Net yield

To calculate your annual running costs:

Mortgage payments + estimated refurbishment cost:
(over 3 years in Dublin £7000 Est) + vacant time (allow 30 days per annum based on an average) Remember to factor in Landlord insurance, service charges (if any) and property/ water/ refuse taxes where applicable.

Your property must be presented to a high standard, as tenants are extremely selective of the property they choose. Make sure the rent you charge is competitive. If you set your rent at the top end of the scale, you could find it takes longer to find tenants, leading to longer vacant periods, where you lose money. However, your rent is competitive, you have more chance of attracting tenants and reducing vacant periods. This means you could still end up earning the same from your property than if you had set a higher rent and the property was vacant for a period.
Finally, to calculate the capital growth of your property investment:

Please remember that this information is simply a guide and every case varies. If you plan to invest in a buy-to-let property, do speak to DfM or seek independent expert advice.