Rental Yield
Calculator UK

Rental yield is calculated by comparing the annual rental income with a property’s value or purchase price. There are two types of rental yield you’ll see used in the UK: gross rental yield and net rental yield.

Gross yield is the simpler and most common calculation, while net yield can give a more accurate picture of long-term returns and be more valuable for comparing multiple investment options, because it factors in running costs such as service charges and maintenance.

Gross rental yield formula

Gross yield = (Annual rent ÷ property value or purchase price) × 100

Net rental yield formula

Net yield = ((Annual rent – annual costs) ÷ property value or purchase price) × 100

Annual costs can include management fees, maintenance, insurance, service charges, ground rent and any other expenses you regularly incur as a landlord.

Example calculation

If a property is worth £300,000 and rents for £1,800 per month (£21,600 per year)

Gross yield = (£21,600 ÷ £300,000) × 100 = 7.2%

If annual costs total £5,000:

Net yield = ((£21,600 – £5,000) ÷ £300,000) × 100 = 5.5%

Gross yield is useful for quick comparisons. Net rental yield gives a more realistic view of performance once expenses are taken into account.

GROSS YIELD VS NET YIELD

Gross rental yield shows the return on a property before any expenses are taken into account, making it useful for quick comparisons between different investments. Net rental yield factors in your running costs, such as management fees, maintenance, insurance and service charges, giving you a more accurate picture of the income you actually retain each year.

Most investors look at gross yield first, then use net yield to understand the true performance of a property over the long term. These costs can include management fees, maintenance, insurance, service charges, mortgage interest and void periods, all of which directly affect net rental yield.

WHY RENTAL YIELD MATTERS

Rental yield helps you understand how well a property performs as an investment. It shows the return you receive each year from rental income and allows you to compare potential purchases, monitor existing properties and assess whether the rent being achieved is in line with the market.

A strong yield can indicate a healthy return, but it should be considered alongside other factors such as tenant demand, location, long-term capital growth and the running costs associated with owning the property.

In the UK, a rental yield of around 5 percent to 8 percent is often considered healthy, although this varies significantly by location. Areas with lower purchase prices can deliver higher rental yields, while prime markets such as London typically see more modest yields, often offset by stronger long-term capital appreciation.