Whilst every property that we rent out produces a rental yield, it also has running costs. This is an unfortunate reality and shouldn’t be ignored when assessing the viability of an investment or carrying out a financial appraisal of an investment opportunity.
Typical running costs of a property could include management fees, refurbishment, repairs and maintenance costs and tax on your rental income. These all have to be considered and taken into account, in order to establish the true income you are likely to receive. In other words, you need to subtract these costs from your ‘gross rent’ in order to establish your ‘net rent’.
The net rent is what is shared between all the UOWN investors in the property, and we work all this out and show you the expected income before you decide whether a property is right for you or not.
So as an example, if the monthly rental income from a property is £500 per month, we can work out the net rent.
Gross rent = £500
£50 management cost
£50 maintenance costs
Net rent = £350
A gross rental yield is typically used by a more experienced investor who can quickly assess the expected costs, but uses the gross rent as a good indicator of an investment. An inexperienced investor should really use the net rental figure, to ensure they have properly accounted for every expected cost and can make a judgement based on complete information.