Rental yield calculator

How the calculation works

Work out the annual rent first by multiplying the monthly rent by 12. Divide that by the property value, then multiply by 100, and you have the gross yield. For net yield, take the annual running costs off the rent before you divide. Gross yield is the quick filter you use when scanning listings. Net yield is the figure that tells you what the property actually earns once the unavoidable costs are in: management, service charges on leasehold flats, safety certificates, routine maintenance and time between tenancies.

Worked example

Take a property worth £250,000 let at £1,250 a month. If you are still deciding the rent itself, our guide to how much rent to charge works it out from local comparables before you test the yield. The annual rent is £15,000, so the gross yield is £15,000 ÷ £250,000 × 100 = 6.0 percent. If the annual running costs come to £3,000, the net yield is (£15,000 − £3,000) ÷ £250,000 × 100 = 4.8 percent. That gap between 6.0 and 4.8 percent is the difference between how the property looks on a listing and how it performs in your bank account.

What is a good rental yield in the UK?

A gross yield of 5 to 7 percent is generally considered solid, and 7 percent or higher is strong. After costs, net yields of 3 to 5 percent are typical for a well-run property. The average gross rental yield in the UK is around 5.8 percent, with the North East the strongest region at roughly 7.9 percent and London the lowest at about 5.1 percent, according to Zoopla's Rental Market Report. The pattern is consistent: northern cities such as Manchester, Liverpool and Leeds trade lower prices for higher income, while London and the South East trade income for capital growth.

Gross yield versus net yield

Gross yield is useful precisely because it is crude: it lets you compare very different properties on a like-for-like basis in seconds. It also flatters every property equally, because it ignores the costs that vary most between them. Two flats can show an identical 6 percent gross yield while one has a £2,000 service charge and a history of long voids and the other has neither. Net yield is where that difference shows up, which is why it is the figure serious investors compare on. For most UK buy-to-lets the gap between gross and net runs to roughly 1.5 to 2.5 percentage points.

The costs that erode net yield

The costs that most often surprise first-time landlords are the recurring compliance ones and the gaps between tenancies. Budget a void allowance of at least 5 to 8 percent of annual rent, higher for new builds in oversupplied areas. Add a contingency for repairs, especially on older stock or blocks with lifts and communal systems. If the purchase is mortgaged, check the yield still holds at today's rate and one to two points above it. Inside August you can tag each expense category and see exactly which cost lines are dragging your net yield down, which is usually where the quickest gains are: renegotiating a management percentage, or scheduling maintenance before it becomes an emergency. Tag every expense automatically and the net figure stays honest.

Cash-on-cash return

Yield measures return against the whole property value. Cash-on-cash return measures it against the cash you actually put in, which is the more useful figure for a leveraged purchase. If you invested £75,000 all in (deposit, buying costs and initial works) and the property throws off £5,250 of pre-tax cash flow after mortgage interest, the cash-on-cash return is £5,250 ÷ £75,000 × 100 = 7.0 percent. The calculator above returns this alongside gross and net so you can see the headline ratio and the return on your own money in one view. To model the monthly money in detail rather than the ratio, use the rental cash flow calculator. If the purchase is mortgaged, check it against lender stress rates with the buy-to-let mortgage calculator, and if you are letting by the room, the HMO calculator models room-by-room income and compliance costs. Yield measures rent against the property's value and ignores how the purchase is financed. To see the return on the cash you actually invest, after the deposit and the mortgage, use the buy-to-let investment calculator.

Tax changes net yield, not gross

Net yield as calculated here is a pre-tax operating figure. For a mortgaged property held personally, Section 24 restricts mortgage interest relief to a basic-rate credit, so the after-tax return for a higher-rate taxpayer is lower than the net yield suggests. That does not change the yield on the property; it changes what you keep. The rental income tax calculator models that correctly.

From the calculator to the real number

A yield on a spreadsheet is an estimate; the number that matters is the one the property actually delivers over a year. Once a property is performing, August reconciles the rent against your bank feed and tracks its real yield alongside valuations and council-tax data across your whole portfolio, so the figure you planned with and the figure you achieve stay close. For the concept rather than the number, see what rental yield means, for where yields are holding up across the country, see our guide to the best places to buy.

Frequently asked questions

How do I calculate rental yield? 

Multiply the monthly rent by 12 for the annual rent, divide by the property value and multiply by 100 for the gross yield. For net yield, take annual running costs off the rent before you divide. The calculator above does both at once.

What is a good rental yield in the UK? 

A gross yield of 5 to 7 percent is solid and 7 percent or more is strong; net yields of 3 to 5 percent after costs are typical. The right number depends on whether you are buying for income or for capital growth.

Is the mortgage a running cost for net yield? 

Net yield as standardly calculated excludes mortgage payments, because it measures the property's performance independent of how it is financed. To bring the mortgage in, look at cash-on-cash return, which the calculator also shows.

How often should I recalculate yield? 

Whenever the rent or the property's value changes materially, and at least once a year as part of a portfolio review. August recalculates it continuously from your actual figures.

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.