Rental yields for landlords have slumped as maintenance costs soared over the last year, new research from a leading lettings agency shows.

The latest yield figure for buy-to-lets is just 3.4%, according to Benham and Reeves.

Researchers analysed the gross rental yield of the average buy-to-let property before comparing this to the net yield actually secured once annual running costs are accounted for.

Income generated

The findings show that currently investing in the average buy-to-let property will set you back £289,824, with the average property currently commanding £1,276 per month in rent. This equates to an income generated to the tune of £15,312 per year, a gross rental yield of 5.3%.

The good news is that this gross rental yield has climbed over the last year, up from 4.8% in the last 12 months.

Yield down

But Benham and Reeves then looked at the net yield secured once the cost of maintaining a buy-to-let is accounted for. The costs incurred include letting agent fees, general maintenance costs, the cost of an annual gas safety certificate, an electrical safety report certificate and landlord insurance.

In total, these additional costs come to £5,468 for the average landlord, and the net yield secured on the average buy-to-let property is just 3.4%.

Lettings agency

Meanwhile, data from another lettings agency, Hamptons, reveals landlords in the UK are paying 40% more mortgage interest than in August last year, which equates to an extra £4.3bn each year.

In August this year, mortgaged investors handed over an average of 37% of their rental income in mortgage costs, up from 28% a year ago.