How to work out rental yield
Rental yield is the annual rent from a property expressed as a percentage of what the property is worth. It is one of the main measures landlords use to compare buy-to-let properties, because it puts a small flat and a large house on the same footing no matter what they cost. To calculate it, take the annual rent, divide it by the property value and multiply by 100. The calculator above does this for you and updates as you type.
The property value you use can be either the price you paid or the current market value. Using the purchase price shows the yield you locked in when you bought. Using an up-to-date market value shows the yield the property earns on what it is worth today, which is useful when you are reviewing a property you have held for a while or deciding whether to sell.
Gross yield versus net yield
Gross yield is based on the full annual rent before any costs are taken off. It is quick to work out and handy for a first comparison, but it flatters properties that are expensive to run. Net yield is the more realistic figure. It takes the annual rent, subtracts the running costs, and then divides what is left by the property value. Because it accounts for what the property actually costs to let, net yield is the number most experienced investors focus on.
Which costs to include in net yield
Net yield should reflect the ongoing cost of running the property. The main items are letting or management fees, repairs and maintenance, landlord insurance, any service charge and ground rent if the property is leasehold, and an allowance for void periods when the property sits empty between tenancies. The calculator lets you enter each of these, including expected voids in months, so the net figure matches your own property rather than a generic assumption.
Net yield usually leaves out mortgage payments and one-off purchase costs such as stamp duty, because those depend on how the deal is financed rather than on the property itself. If you want to see the effect of financing separately, it helps to look at cash flow and return on investment alongside yield. When you are reviewing the rent itself, our rent increase calculator shows when and by how much you can lawfully raise it, and for shared houses the HMO calculator works out room-by-room income.
What counts as a good rental yield in the UK
There is no single number that counts as a good yield, because it depends on where the property is, what type it is and how you run it. As a rule, areas with lower property prices tend to show higher yields, while more expensive areas often show lower yields but may offer stronger capital growth. Houses in multiple occupation typically aim for higher yields than single lets because the rent is spread across several rooms, but they also cost more to manage.
Rather than chasing a headline percentage, judge a yield in context. Compare the net yield against your borrowing costs and against what you could earn elsewhere, and weigh it against the prospects for the rent and the property value over time. A lower yield in a strong location can outperform a higher yield somewhere with weaker demand. If you want to check whether a property still stacks up at current mortgage rates, our guide on buy-to-let profitability works through the numbers in more detail.