So a “good rental yield” in Ireland at the moment is anything above 6%. Rental yields in less sought after / properties can be as high as into double digits. What is a Good Rental Yield in Ireland?Īt the time of writing, rental yields in prime locations are in the region of 6%. An investor who manages to buy a property and subsequently increase the rent is effectively managing his/her yield upward. Applying a 6% yield to this €1200, the additional €100 per month of rent increases the value of the property by €20,000. Let’s suppose a landlord increases a tenant’s rent by €100/month or €1200 per annum. The greater the rent, the more an investor will be willing to pay. So the return is made up partially of rent and partially of capital appreciation this is not dissimilar to an investor in shares having a return in dividends but also in share price appreciation. In a normally functioning property market, an investor can also expect a reasonable amount of capital appreciation in the value of the property. Why Are Investors So Concerned With Rental Yield?īuy to let investors view a property as no more than a steady stream of rental income. Many BTL investors see them as a form of pension in that they cost a little bit each month but in the long run, they produce a steady return. Once the mortgage is repaid, the investor owns the then debt-free building, which will have appreciated considerably over the lifetime of the investment. This situation will typically gradually ease over several years as rents slowly increase and mortgage payments stay constant. For these reasons, a typical buy to let investor putting down a 20% deposit will end up with a negative cash flow each month ie the after tax rental income will not cover the expenses associated with the investment.
It is also important to realise that rental income is taxed like any other income an earner in the higher tax bracket can expect to see over 50% of net rental income be paid over in tax. Estimate of Insurance, Management Fees, Mortgage Interest, Repairs & Maintenance
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