What is rental yield?
Rental Yield Calculator for Landlords
Understand and improve your rental yield
Strong rental returns rarely happen by accident. The August Rental Yield Calculator helps you size up a property quickly, then go deeper: from gross and net yield to cash-on-cash returns, sensitivity checks, and the everyday costs that erode profits. Use it to compare scenarios, pressure-test assumptions, and then manage the property inside August so your actual performance stays close to the plan.
What rental yield really tells you
Rental yield is the annual rent as a percentage of your property price or current market value for owned assets. Investors use it to compare opportunities on a like for like basis and to check whether income adequately compensates for risk and effort.
There are three figures worth tracking:
Gross yield takes annual rent and divides by purchase price. It is a quick filter, useful for screening.
Net yield deducts running costs before dividing by price. The running costs might include management, insurance, service charge, maintenance, safety checks, ground rent, typical voids. It is the truer picture of operating performance.
Cash-on-cash return looks at annual pre-tax cash flow divided by the cash you have tied up (deposit + buying costs + any refurb). This is especially useful if you’re using a mortgage.
How to calculate yield with a UK example
Step 1 - Gross yield
If a flat costs £250,000 and achieves £1,250 per month:
Annual rent £1,250 × 12 = £15,000
Gross yield = £15,000 ÷ £250,000 × 100 = 6.0%
Step 2 - Net yield
Assume typical annual costs:
Letting/management and compliance services
Buildings insurance and service charge
Maintenance and safety checks
Allowance for voids and arrears
If those total £3,600 per year:
Net operating income = £15,000 − £3,600 = £11,400
Net yield = £11,400 ÷ £250,000 × 100 = 4.56%
Step 3 - Cash-on-cash
If you invested £75,000 cash all-in (deposit plus buying costs and initial works) and your pre-tax cash flow after mortgage interest is £5,250 per year:
Cash-on-cash return = £5,250 ÷ £75,000 × 100 = 7.0%
Gross vs net yield, why the difference matters
Gross yield is useful when scanning listings. However, it ignores costs that are unavoidable in the UK market: management, service charges on leasehold flats, regular safety checks (e.g. gas, electrical, alarms), periodic maintenance, and time between tenancies. Net yield incorporates those realities. If two properties show the same gross yield but one has higher service charges or is likely to sit vacant longer, net yield will reveal the better choice.
Inside August, you can tag each expense category to see which cost lines drag your net yield down and where to optimise. For example, negotiating management percentages or scheduling preventive maintenance.
Stress-testing your assumptions, be conservative
Yield is only as good as the inputs. Before you commit, pressure-test your numbers:
Void allowance - Model at least 5–8% of annual rent (higher for new builds in oversupplied areas or for short-lets outside peak season).
Unexpected repairs - Add an annual contingency or a sinking fund, especially for older stock or blocks with lifts/communal systems.
Rate rise - If using a mortgage, check interest cover at today’s rate and +1–2 percentage points.
Realistic rents - Compare against local listings and achieved rents, not just asking prices.
The August calculator lets you tweak each variable in seconds. Save multiple versions (e.g., “Base case”, “Downside”, “Best case”) and compare side by side.
What is a ‘good’ rental yield in the UK?
Good yield depends on location, property type, tenant profile and your strategy. City-centre flats with strong demand may show lower yields but steadier occupancy and lower maintenance. HMOs and short-lets can produce higher yields but demand tighter management, licensing and more time. The key is risk-adjusted return. Does the income, after realistic costs and your time value, compensate for market and regulatory risk?
Costs to include for a realistic net yield
In the UK, sensible net yield calculations usually include: management or letting fees, buildings/landlord insurance, service charge and ground rent (leasehold), compliance (gas safety, EICR, alarms), minor maintenance, gardening/cleaning for communal areas, inventory and check-in/out, tenancy renewals or remarketing, and a voids allowance. Many landlords also add a capital expenditure reserve for items like boilers, kitchens or roofs, which protects long-term returns.
Yield vs cash flow vs capital growth
Yield focuses on income today. Cash flow layers in finance costs and timing. Capital growth compounds over time and can outweigh yield in certain postcodes or regeneration areas. A resilient strategy acknowledges all three. Use the calculator for the numbers, then set compliance reminders and maintenance schedules in August to protect income and resale value.
Finance and tax, practical UK thoughts
Mortgage interest is a cash cost that affects cash flow. For tax, individual landlords receive a basic-rate credit on finance costs rather than full deduction, while companies may treat interest differently. Buying costs (for example legal, SDLT including surcharges) and early repayment charges influence cash-on-cash returns. Always seek professional advice for your circumstances. August helps you keep the underlying records clean, upload these into the app.
Portfolio view, compare properties like-for-like
When you manage multiple units, consistency wins. Think about your target rent, expected costs and void assumptions for each property. Consider actual yield vs underwritten yield, letting you direct effort where it moves the needle. Renegotiating a service charge, improving energy efficiency to reduce bills, or adjusting rent at renewal to hit target returns.
Why use August alongside the calculator?
One source of truth - Link your bank to categorise rent automatically.
Compliance safeguarded - Gas, electrical, alarms, right-to-rent, deposit protection and licensing tasks listed out in the Compliance checklist help reduce risk and avoid avoidable costs.
Audit-ready - Store all docs, invoices and safety certs in one place.
Start with the calculator, then keep the plan honest in August
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Disclaimer
Figures are estimates only for informational purposes and do not account for all potential costs. Check your numbers with a qualified professional before making investment decisions.
For more information read our What is Rental Yield? A Landlord's guide.
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