Rental yield is the single most important number for any buy-to-let investor. It tells you how hard your money is working as an income-generating asset. But there's an important difference between the headline figure and the real return — and understanding it can save you from a poor investment.
What is rental yield?
Rental yield is your annual rental income expressed as a percentage of the property's value. It lets you compare the income potential of different properties regardless of their price, and compare property against other investments like savings accounts.
Gross yield vs net yield
There are two ways to measure yield, and the gap between them is where many new investors go wrong.
Gross yield
The simple version: annual rent divided by property price, times 100. A £250,000 property earning £1,200 a month (£14,400 a year) has a gross yield of 5.76%. Gross yield ignores all costs, so it always looks better than reality.
Net yield
The honest version: it subtracts your running costs before calculating the percentage. Once you account for letting fees, insurance, maintenance and void periods, net yield gives a far more accurate picture of your actual return.
What counts as a good yield in the UK?
| Gross yield | Assessment |
|---|---|
| Below 4% | Low — typical of London and the South East |
| 5-6% | Solid, sustainable return |
| 7-8% | Strong |
| Above 8% | Excellent (but check why it's so high) |
Northern cities like Manchester, Liverpool, Leeds and Sheffield often deliver higher yields than London, because property prices are lower relative to rents. However, very high yields sometimes signal higher risk areas or properties that are harder to let.
The costs every investor must factor in
- Letting agent fees: typically 8-15% of rent for full management.
- Maintenance and repairs: budget around 1% of property value per year.
- Landlord insurance: a few hundred pounds annually.
- Void periods: budget for 1-2 months a year with no rent.
- Ground rent and service charges: for leasehold properties.
- Mortgage interest: the largest cost for leveraged investors.
Yield isn't everything
A high yield is attractive, but successful property investment also depends on capital growth (the property rising in value), the quality of tenants, and how much management hassle is involved. A lower-yield property in a strong growth area can outperform a high-yield property in a declining one over time. The smartest investors look at total return, not just yield.
Calculate your real return
Don't rely on the headline gross figure an agent quotes. Our rental yield calculator shows both gross and net yield, your monthly cash flow and break-even timeline — so you can assess a property's true income potential before you buy.
Try the Rental Yield Calculator
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This article is for general information only and does not constitute financial, tax or legal advice. Tax rules and rates can change, and your personal circumstances affect how they apply to you. Always consult a qualified professional before making financial decisions. Figures are based on 2025/26 rates.