Rental yield is the single most important metric for buy-to-let investors. It tells you how much income a property generates relative to its price, and it is the quickest way to compare investment opportunities.
Gross yield vs net yield
There are two ways to calculate rental yield, and confusing them is a common mistake.
Gross yield
Gross yield is the simplest calculation. Divide the annual rental income by the property price and multiply by 100:
For example, a property worth £200,000 generating £1,000 per month in rent has a gross yield of 6%:
Net yield
Net yield subtracts your costs before calculating. This gives a much more realistic picture of your actual return:
Annual costs include mortgage payments, insurance, management fees, maintenance, void periods, and service charges. A property with 6% gross yield might have a net yield of only 3-4% once you factor these in.
What counts as a good yield?
This varies by location and strategy:
| Gross Yield | Assessment |
|---|---|
| Below 4% | Low, typical of prime London and the South East. Investors rely on capital growth instead. |
| 4% – 6% | Moderate, common in established suburban areas and commuter towns. |
| 6% – 8% | Good, often found in northern cities, university towns, and regeneration areas. |
| Above 8% | High, but check why. Very high yields can signal high risk, problem tenants, or low capital growth. |
The costs that eat into your yield
- Mortgage interest, the biggest cost for leveraged investors. Remember, tax relief is now limited to the basic rate (20%)
- Letting agent fees, typically 8-12% of rent for full management
- Maintenance and repairs, budget 10-15% of rent annually as a reserve
- Void periods, assume 1 month vacant per year as a baseline
- Insurance, landlord insurance, not standard home insurance
- Service charges and ground rent, for leasehold flats, these are unavoidable
- Compliance costs, gas safety certificates, EPC, electrical inspections, smoke and CO alarms
Yield is not the whole story
A high yield means nothing if the property is hard to let, attracts unreliable tenants, or loses value over time. The best buy-to-let investments balance yield with:
- Tenant demand, areas near transport, universities, or employment hubs
- Capital growth potential, regeneration areas can offer both yield and appreciation
- Low maintenance, modern builds and ex-local-authority properties often have lower ongoing costs
Calculate rental yield instantly
Use our free rental yield calculator to input a property price and monthly rent and see gross and net yield instantly. It also factors in common costs so you get a realistic picture before committing.
Investor-grade analysis
Our Investor report (£49.99) includes rental valuation, gross and net yield analysis, rental demand scores, and price growth trends, everything you need to evaluate a buy-to-let opportunity.