Resumo
Rental yield is the annual return you get from renting out a property, expressed as a percentage of the property price. Gross yield shows total rental income as a percentage of property value. Net yield deducts all running costs (management fees, insurance, maintenance, void periods, ground rent, service charges) to show actual profit as a percentage of property value.
UK average gross yields range from 5.94% to 7.7% nationally (Q4 2025, Fleet Mortgages). The North East offers the highest yields (7.9-9.6%), while London has the lowest (5.1%). A good rule of thumb: 5%+ gross yield is considered strong, and 3-5% net yield is typical for a healthy buy-to-let investment.
Como funciona
Gross yield vs net yield
Gross yield is a simple top-line metric: annual rent divided by property price, multiplied by 100. It ignores all costs and tells you the maximum possible return if there were no expenses.
Net yield is the real profitability metric. It subtracts all annual running costs from the rental income before dividing by property price. This gives you the true return on the property investment.
What costs to include
A realistic net yield calculation should include:
- Management fees — typically 10-15% of annual rent if you use a letting agent for full management (tenant finding, rent collection, property inspections, maintenance coordination)
- Landlord insurance — average £225-£235/year for comprehensive cover, or £170-£180 for basic buildings insurance
- Maintenance — a common rule of thumb is 1% of property value per year (boiler servicing, repairs, decorating, appliance replacement)
- Void periods — average 3 weeks per year (21 days) when the property is empty between tenants, trending down to ~20 days in recent data
- Ground rent — for leasehold properties. Capped at £250/year from 2026 reform, £0 for new builds purchased after June 2022
- Service charges — for flats with shared facilities. Typically £1,000-£2,000/year depending on building amenities
The formulas
Where
Where
Where
Where
Exemplo prático
£250,000 property, £1,200/month rent, 25% deposit
Annual rent
= £14,400
Deposit (25%)
= £62,500
Gross yield
= 5.76%
Management fee (10%)
= £1,440
Insurance
= £500
Maintenance (1% of value)
= £1,000
Void loss (2 weeks)
= £553.85
Ground rent
= £0
Service charge
= £0
Total annual costs
= £3,493.85
Net yield
= 4.36%
Annual profit
= £10,906.15
Monthly cash flow
= £908.85
ROI on deposit
= 17.45%
Index fund comparison (7% return)
= £4,375/year (149% less)
Result
Net yield: 4.36% | Annual profit: £10,906 | Monthly cash flow: £909
Entradas explicadas
- Property price — the purchase price of the investment property
- Monthly rent — the monthly rental income you receive from tenants
- Deposit % — the percentage of the property price you’re putting down as a deposit (typically 25% for buy-to-let mortgages)
- Management fee % — the percentage of annual rent charged by a letting agent for full management (typically 10-15%)
- Annual insurance — landlord insurance premium (buildings, contents if furnished, liability cover)
- Annual maintenance — budget for repairs, servicing, decorating (rule of thumb: 1% of property value)
- Void weeks per year — how many weeks the property sits empty between tenants (UK average: 3 weeks)
- Annual ground rent — for leasehold properties (capped at £250/year from 2026, £0 for new builds post-June 2022)
- Annual service charge — for flats with shared facilities (lifts, communal gardens, cleaning)
- Index fund return % — expected annual return from an index fund investment for comparison (typical: 7%)
Resultados explicados
- Gross yield % — annual rental income as a percentage of property price (before costs)
- Net yield % — annual profit (after all costs) as a percentage of property price
- Annual profit — total rental income minus all annual running costs
- Monthly cash flow — how much profit you pocket each month after all expenses
- ROI vs deposit % — annual profit as a percentage of the deposit you put down (compares leverage effect of using a mortgage)
- Index fund comparison — what your deposit would earn in a passive index fund instead (shows opportunity cost)
Premissas e limitações
- Mortgage costs not included — this calculator shows yield based on total property price, not mortgage interest payments. For cash flow after mortgage payments, see the dedicated Buy-to-Let Calculator.
- Rental income assumed stable — no rent increases or decreases during the year
- Costs are estimates — actual management fees, insurance, and maintenance can vary significantly by property type, location, and condition
- No capital appreciation — yield calculations show income return only, not property value growth
- Tax not included — does not account for income tax on rental profits, capital gains tax on sale, or stamp duty on purchase
- Average void periods — actual vacancy rates depend on location, property type, and market conditions
- Ground rent cap — the 2026 £250/year cap applies to existing leases; new builds since June 2022 have £0 ground rent
- Service charges variable — can increase annually and may include one-off major works contributions
Verificação
Test cases verified against calculateRentalYield() function output:
| Property Price | Rent/month | Gross Yield | Net Yield | Annual Profit |
|---|---|---|---|---|
| £250,000 | £1,200 | 5.76% | 4.36% | £10,906 |
| £200,000 | £900 | 5.40% | 3.90% | £7,805 |
| £500,000 | £2,500 | 6.00% | 4.67% | £23,346 |
| £150,000 | £600 | 4.80% | 3.14% | £4,703 |
Assumptions for verification table:
- Deposit: 25%
- Management fee: 10%
- Insurance: £500/year
- Maintenance: £1,000/year (£2,000 for £500k property)
- Void weeks: 2 weeks/year
- Ground rent: £0
- Service charge: £0
Sources
Related calculators
Buy-to-Let
Calculate your buy-to-let profit after mortgage, costs, and Section 24 tax. Includes stamp duty with 5% surcharge, rental coverage stress test, and cash-on-cash return.
Rent vs Buy
Compare the total cost of renting vs buying over time. See when buying becomes cheaper with a month-by-month simulation.
Total Cost of Buying
Calculate the total upfront cash you need to buy a house: deposit, stamp duty, solicitor fees, survey, moving costs, and mortgage fees — all in one place.