Rental yield is the single most useful number for judging a buy-to-let property as an income investment. It expresses your annual rent as a percentage of what the property is worth, so you can compare a flat in Manchester against a terrace in Cardiff on the same footing regardless of price.
But "yield" comes in more than one flavour, and the gap between them is where many new landlords come unstuck. Below we walk through how to calculate each, what a genuinely good figure looks like in today's market, and why yield alone never tells the whole story.
How do you calculate rental yield?
Gross rental yield is your annual rent divided by the property price, multiplied by 100. Net rental yield takes the same annual rent, subtracts your running costs, then divides by the price. Gross is the quick headline; net is what you actually keep.
The two formulas, in plain terms:
- Gross yield = (annual rent ÷ property price) × 100
- Net yield = ((annual rent − annual running costs) ÷ property price) × 100
Gross yield is fast and useful for a first sift of the market. Net yield takes more work but reflects reality, because it accounts for the money that leaks out before rent reaches your pocket. If you want to skip the arithmetic, our free rental yield calculator works out both figures from a price and a monthly rent.
What's the difference between gross and net yield?
Gross yield uses rent alone; net yield subtracts the costs of actually running the property. Because those costs are real and recurring, net yield is always lower than gross — often by a couple of percentage points or more, depending on the property.
The costs that separate the two typically include:
- Letting or management fees (often 8–12% of rent if you use an agent)
- Maintenance and repairs
- Landlord insurance
- Void periods when the property sits empty between tenants
- Service charges and ground rent on leasehold flats
- Compliance costs — EICR, Gas Safety, EPC and the like
Whether you subtract mortgage interest depends on the definition you're using. Some landlords fold it into net yield; others keep net yield mortgage-free and treat financing separately through ROI (below). Just be consistent so your comparisons stay honest.
What is a good rental yield in the UK?
There's no single national figure. As a rough guide, many UK landlords treat a gross yield around 5–6% as solid and anything meaningfully above that as strong — but this is indicative and heavily region-dependent, so always sense-check against local comparables.
Yields vary widely by location. Parts of the north of England, the north-west, and certain university and regional cities have tended to offer higher gross yields, while London and much of the south east tend lower because high purchase prices suppress the percentage. A 4% gross yield in an area with strong capital growth may serve you better than 8% somewhere with stagnant prices and difficult tenant demand.
Treat any yield range as a starting point, not a target. A high headline yield can mask high void risk, heavy maintenance, or weak long-term price growth. Always dig into the local rental market before you buy.
Worked example: gross vs net yield
Consider an illustrative £200,000 flat let at £1,000 per month. Gross yield looks healthy, but once running costs are stripped out the net figure is noticeably lower — which is why you should never buy on the gross number alone.
| Item (illustrative) | Figure |
|---|---|
| Property price | £200,000 |
| Monthly rent | £1,000 |
| Annual rent | £12,000 |
| Gross yield | 6.0% |
| Management (10%) | −£1,200 |
| Maintenance | −£800 |
| Insurance | −£300 |
| Service charge / ground rent | −£1,500 |
| Void allowance (~1 month) | −£1,000 |
| Annual running costs | −£4,800 |
| Net annual income | £7,200 |
| Net yield | 3.6% |
The figures above are illustrative only — your own costs will differ. But the shape is realistic: a tidy 6% gross can become a far more modest 3.6% net once the leasehold and running costs bite.
What about ROI and total return?
Yield measures return against the property's value; ROI (return on capital employed) measures it against the cash you actually invested. Total return goes further still, adding capital growth to rental income for the full picture of how an investment performs.
For a mortgaged landlord, ROI is often the more revealing number. If you put down a £50,000 deposit and clear £3,000 a year after mortgage costs, that's a 6% return on capital employed — even if the net yield on the full property value looks modest. Leverage changes the maths considerably.
Total return combines two engines: rental income (your yield) and capital growth (the property rising in value). A lower-yielding property in a strong-growth area can outperform a high-yielder over a decade once appreciation is counted. Neither figure alone captures the whole investment.
Bringing it together
Use gross yield to shortlist, net yield to compare properties honestly, ROI to judge leveraged deals, and total return to think long term. Keeping accurate records of rent and every deductible cost makes these numbers far easier to track — this is where tools like PAM help, by logging income and expenses in one place so your real net position is always visible.
Run your own numbers before you commit to any purchase, and revisit them annually as rents, costs and prices shift.