Rental yield is the single most-cited number in buy-to-let investing — and one of the most misunderstood. The headline gross yield on a property listing is almost never what you will actually receive. Here is what the numbers mean and how to calculate them properly.
Use the Rental Yield Calculator to model both gross and net yield for any property.
The Gross Yield Formula
Gross yield is the starting point. It ignores all costs:
Gross yield = (Annual rent ÷ Property value) × 100
If a property costs £200,000 and achieves £12,000 rent per year (£1,000/month):
Gross yield = (£12,000 ÷ £200,000) × 100 = 6%
It is a quick comparison tool — useful for screening properties before doing deeper analysis. It tells you nothing about your actual return.
Net Yield: The Number That Matters
Net yield deducts all property-related costs before calculating the yield:
Net yield = ((Annual rent − Annual costs) ÷ Property value) × 100
Typical annual costs for a buy-to-let property:
- Letting agent fees: 8–15% of annual rent (fully managed)
- Maintenance and repairs: 1–2% of property value per year (rule of thumb)
- Buildings and contents insurance: £200–£600/year
- Gas safety certificate: £60–£100/year
- EPC: £60–£120 every 10 years
- Accountancy fees: £300–£600/year (if using a limited company structure)
- Mortgage arrangement fees (amortised over product term)
- Void periods: typically 2–6 weeks per year
For the £200,000 property above, if annual costs total £3,600:
Net yield = ((£12,000 − £3,600) ÷ £200,000) × 100 = 4.2%
That is a significant difference from the 6% headline.
Cash-on-Cash Return vs Yield
If you used a mortgage, your actual cash return is different from yield. The cash-on-cash return measures your annual net profit against the cash you actually invested (deposit + purchase costs), not the full property value.
If you put in a £50,000 deposit and your net annual cash flow after mortgage payments is £2,400:
Cash-on-cash return = (£2,400 ÷ £50,000) × 100 = 4.8%
This can be higher or lower than the net yield depending on the mortgage rate and loan-to-value.
What Is a Good Rental Yield?
There is no universal answer, but these benchmarks are a useful guide for the UK market:
| Gross yield | Assessment |
|---|---|
| Below 4% | Low — likely a capital growth play |
| 4–5% | Average — acceptable in prime city areas |
| 5–7% | Good — typical of regional cities |
| 7–9% | High — often HMOs, student lets, or lower-price areas |
| Above 9% | Very high — investigate void risk and condition |
A property with a 9% gross yield but persistent voids, a run-down area, and high maintenance costs may deliver a worse net yield than a well-maintained 5.5% gross yield property with reliable professional tenants.
Rental Yield by UK City (2026 Benchmarks)
| City | Typical gross yield |
|---|---|
| London | 3–5% |
| Edinburgh | 4–6.5% |
| Bristol | 4–7% |
| Birmingham | 5–8% |
| Manchester | 5–8% |
| Leeds | 5–9% |
| Liverpool | 6–9% |
| Glasgow | 6–9% |
| Nottingham | 6–8% |
| Sunderland | 7–10% |
These are approximate ranges. Individual streets and property types vary significantly.
How Void Periods Affect Your Yield
Void periods (when the property is empty) directly erode your annual rent. Even one month's void on a £12,000/year property reduces your effective annual rent to £11,000 — an immediate -8.3% reduction on gross income.
Modelling a realistic void rate (2–6% of annual rent) in your calculations is essential. The Rental Yield Calculator lets you input a void percentage to see its direct impact on net yield.
Rental Yield vs Capital Growth
Many investors focus exclusively on yield, but total return includes capital appreciation. In high-demand cities with restricted housing supply (London, Edinburgh, Bristol), capital growth historically compensates for lower yields. In high-yield areas (Liverpool, Sunderland, Hull), lower capital growth is the trade-off.
Your investment strategy determines which matters more:
- Income-focused: prioritise net yield
- Wealth-building: consider total return (yield + capital growth)
- Leveraged: cash-on-cash return matters most
The Impact of Gearing (Leverage)
A mortgage amplifies both returns and risks. If a property goes up 10% in value, a buyer with a 25% deposit achieves a 40% return on their cash invested — but if it falls 10%, they lose 40% of their deposit.
Always model your figures both with and without a mortgage to understand your true exposure.
Use the Rental Yield Calculator and the Buy-to-Let Calculator together to build a complete picture before any purchase.