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.