The short answer
A gross rental yield of around 5–8% is often treated as healthy, but the number that really matters is the net yield — after costs, empty months and buying costs — which is commonly 1.5–3 points lower. Yield also has to be weighed against how much the property might grow in value: high-yield areas often grow more slowly.
Rental yield is the first number any landlord or investor looks at, and also the most quoted out of context. A listing that says “8% yield!” is almost always giving you the gross figure — rent divided by price — which ignores every cost of actually owning the place. Here's how to work out both, and how to judge what you see.
Gross vs net yield
- Gross yield = yearly rent ÷ property price × 100. Quick, useful for comparing listings, and flattering.
- Net yield = (rent you actually collect − running costs) ÷ (price + buying costs) × 100. Slower to work out, and the one that tells you whether the property pays.
Neither includes mortgage interest or income tax — yield measures the property, not your financing.
Worked example
A flat costs £250,000 and rents for £1,250 a month.
- 1Gross yield: £1,250 × 12 = £15,000 a year. £15,000 ÷ £250,000 = 6.0%.
- 2Allow for 5% vacancy (about two and a half weeks empty a year): £15,000 × 0.95 = £14,250 collected.
- 3Subtract running costs — letting agent, insurance, repairs, service charge — say £3,000: £11,250.
- 4Add buying costs to the price — stamp duty, legal fees, a few fixes — say £9,000: £259,000.
- 5Net yield: £11,250 ÷ £259,000 = 4.3%.
The advertised 6% became 4.3% before a single pound of mortgage interest. That gap is normal.
Running costs people forget
| Cost | Rough guide |
|---|---|
| Letting / management agent | 8–15% of rent, if you use one |
| Maintenance and repairs | Often budgeted at around 1% of the property value a year |
| Landlord insurance | A few hundred a year |
| Service charge / ground rent (flats) | Can be thousands — check before buying |
| Safety certificates and compliance | Gas, electrical and similar checks, depending on the country |
| Vacancy between tenants | Two to four weeks a year is a common allowance |
So what's a good yield?
There's no single answer, because yield is only half of the return. The other half is capital growth:
- Expensive, popular cities often have low yields (3–5% gross) because prices are high relative to rents — investors accept that in the hope of stronger growth.
- Cheaper towns can show 7–10% gross, but prices may grow slowly, tenants may be harder to find, and costs eat a bigger share of a smaller rent.
To see the return on your money once a mortgage is involved, combine the mortgage calculator with the ROI calculator.
Frequently asked questions
How do you calculate rental yield?
Gross yield is yearly rent ÷ property price × 100. Net yield is (rent collected − running costs) ÷ (price + buying costs) × 100.
What is a good rental yield in the UK?
Many investors look for 5–8% gross, but it varies widely by area. Net yields are usually 1.5–3 points lower.
Is a higher rental yield always better?
Not necessarily. Very high yields often come with slower price growth, higher vacancies or bigger maintenance bills.
Does rental yield include mortgage costs?
No. Yield measures the property itself. Mortgage interest and tax affect your personal return, not the yield.
OnlineToolPro Editorial Team
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The team behind OnlineToolPro. We write guides from building and testing these tools, and check platform rules against official documentation such as YouTube Help. When something changes, we update the article and its date.