New investors buying property at auction have been warned to get clued up about yields before making a bid.

Property investors can no longer make fast cash on property due to the struggling property market and experts say they must look at the long term gain the property will bring.

Auction Finance Limited questioned 100 investors and 72 per cent did not know how to work out the yield of a rental property.

Research by the Essential Information Group show rental yields for semi detached houses bought at auction reached 7.57% in the second quarter of 2009, which represents an improvement over the 7.4% experienced in the first quarter of the year.

Chris Baguley, director at specialist lender, Auction Finance Limited says yield should be the main driver for property purchases. He said:

“It still astounds me that investors can walk away from an auction after purchasing a property and still have no idea what kind of yield they can expect from it.  Some investors used to focus on short-term increases in the value of the property, rather than the long term rental yield, and so when the crunch hit they were left high and dry.”

Rental yield is the amount of money a landlord receives in rent over the course of one year, expressed as a percentage of the amount of money invested in the property. Rental yield is calculated by taking the annual rent and dividing it by the house price, multiplied by 100. This gives you the yield as a percentage.

“For example, if a buy to let investor buys a house worth £200,000 and their tenants pay £10,000 a year in rent, the rental yield on the property would be five per cent. Its important investors know the net yield they can expect to earn before purchasing a buy-to-let property,” added Chris.