Most property investors make decisions based on gut feel or a single metric like gross yield. The result is paying more for a property that performs worse when all factors are properly compared. Here is a framework for making systematic, evidence-based comparisons.
Use the Property Comparison Calculator to compare two properties side-by-side across all key metrics instantly.
Why Single-Metric Analysis Fails
The most common mistake: comparing properties on gross yield alone.
Property A: £250,000 purchase, £14,400 annual rent = 5.76% gross yield Property B: £300,000 purchase, £16,800 annual rent = 5.60% gross yield
Property A appears better on gross yield. But what if Property A has £4,000/year higher running costs? The net yield comparison flips entirely.
Every metric tells part of the story. The complete picture requires comparing at least six measures.
The Six Metrics That Matter
1. Gross Yield
Annual rent ÷ property value × 100
The entry-level screen. Use it to filter out obviously poor options quickly, but never make a final decision on gross yield alone.
2. Net Yield
(Annual rent − Annual costs) ÷ property value × 100
The more honest measure. Requires knowing:
- Management fees (8–15% of rent)
- Maintenance estimate (1–2% of value per year)
- Insurance, certificates, and compliance costs
- Ground rent / service charge (leasehold)
- Void allowance (2–6% of annual rent)
3. Monthly Cash Flow
After-mortgage monthly net income. This tells you whether the property is self-funding or requires top-ups from your own pocket each month.
Cash flow = Monthly rent − Mortgage payment − Monthly running costs
A cash flow negative property can still be a good investment if the capital growth is sufficient — but negative cash flow requires you to subsidise it monthly.
4. Gross Capital Gain
Projected value increase as a percentage. This requires making assumptions about future price growth — the least reliable metric, but too important to ignore.
Typical approaches:
- Use the local 10-year average house price growth rate
- Model a conservative case (0%), base case (3%), and optimistic case (5%)
- Consider supply/demand fundamentals in the area
5. Total ROI
(Net rental income + Capital gain + Equity built) ÷ Initial cash invested × 100
The true bottom line over the full holding period. Compare this across different properties and different holding periods.
6. Annualised CAGR
Converts total ROI into an annual equivalent so you can compare property with other investment classes (equities, bonds, savings).
A Worked Comparison
| Metric | Property A | Property B |
|---|---|---|
| Purchase price | £200,000 | £280,000 |
| Monthly rent | £1,050 | £1,400 |
| Annual running costs | £2,200 | £3,400 |
| Gross yield | 6.3% | 6.0% |
| Net yield | 5.1% | 4.8% |
| Monthly cash flow (75% LTV, 5% rate) | +£52 | −£108 |
| Assumed annual capital growth | 3% | 4% |
| 10-year total ROI | 198% | 234% |
| Annualised CAGR | 11.4% | 12.9% |
Despite Property A having better yield metrics, Property B's higher capital growth assumption makes it the better total return investment over 10 years — if that growth materialises.
The question becomes: how confident are you in the capital growth differential? If you reduce Property B's assumed growth to 3%, the advantage disappears.
What Cannot Be Modelled
Quantitative comparison handles the numbers. But some factors resist numerical comparison:
Tenant quality and demand A property near a hospital, university, or major employer will typically have lower void periods and more predictable tenant demand than one in a marginal location.
Area trajectory Is the area improving (regeneration, transport investment, demographic change) or declining? This fundamentally affects both rental demand and capital growth.
Property condition and future capex An older property may have a lower price but higher future capital expenditure needs — roof replacement, rewiring, boiler replacement. Factor in the likely spend over the holding period.
Management complexity An HMO yielding 9% requires far more active management than a single-let at 5.5%. Is the time cost worth the yield premium to you?
Liquidity Some property types (purpose-built student accommodation, unusual leasehold properties, rural locations) are harder to sell when you need to exit.
When Properties Are in Different Locations
Comparing a London flat at 4% yield with a Manchester terrace at 7% yield is comparing different investment propositions:
- London: income today less attractive, long-term capital growth historically stronger
- Manchester: income more attractive now, capital growth historically lower but accelerating
Neither is inherently better. Which suits your investment strategy depends on your time horizon, income needs, and capital growth outlook.
Use the Property Comparison Calculator to run side-by-side analysis on any two properties before making a decision.