Rental Yield
Rental yield is a way of measuring how much income a rental property produces compared with what it is worth. It is usually shown as a percentage. The most common version, gross rental yield, is the annual rent divided by the property’s value or purchase price, multiplied by 100. Net yield goes further and deducts costs such as insurance, repairs and management fees before working out the percentage.
Landlords, agents and lenders use yield to compare investments and decide whether a rent level is sustainable. For renters, yield matters mainly because some landlords set target returns and may seek higher rents to meet them. However, the Renters’ Rights Act is reshaping how far and how fast rents can change. It restricts rent increases to once per year in most private tenancies, requires landlords to use formal notice procedures, such as a section 13 notice for rises, and allows tenants to challenge rent hikes they believe exceed local market levels.
The Act also bans rental bidding wars and caps rent in advance at one month, which limits the ability to push advertised rents up purely to chase yield. Rental yield therefore remains a key investment concept for landlords, but it must now sit within a more regulated framework that aims to keep rent increases fair and predictable for tenants.
