How to calculate rental yield
Rental yield is the annual rent shown as a percentage of the property value. The formula for gross rental yield is the annual rent divided by the property value, times 100. UK rent is usually quoted per month, so multiply the monthly figure by 12 first. On a £250,000 property let at £1,200 a month, the annual rent is £14,400 and the gross yield is 5.76%.
Gross yield vs net yield
Gross yield ignores costs, so it flatters the return. Net yield takes off your annual running costs first, which makes it the figure worth comparing properties on. Costs to include are letting and management fees, landlord insurance, maintenance and repairs, any ground rent or service charge on a leasehold flat, and the rent lost during void periods when the property sits empty. Net yield is the annual rent minus those costs, divided by the property value, times 100.
What is a good rental yield in the UK?
The average UK rental yield runs between about 5% and 8%. As a rough guide, a yield around 5% to 6% is treated as good, and above 6% as very good. Yields vary widely by region, with parts of the North of England and university cities often running higher than London and the South East. A high gross yield is only worth chasing if the net yield holds up once costs and void risk are taken into account.
Gross yield at common UK rents on a £250,000 property
| Monthly rent | Annual rent | Gross yield |
|---|
| £900 | £10,800 | 4.32% |
| £1,100 | £13,200 | 5.28% |
| £1,200 | £14,400 | 5.76% |
| £1,400 | £16,800 | 6.72% |
| £1,600 | £19,200 | 7.68% |
Frequently asked questions
How do I calculate my rental yield?
Gross rental yield is the annual rent divided by the property value, times 100. For example, £14,400 of annual rent on a £250,000 property is a 5.76% gross yield. Net yield does the same sum after taking off running costs such as letting fees, insurance, maintenance and void periods.
What is a good rental yield in the UK?
The average UK rental yield sits between about 5% and 8%. Anything around 5% to 6% is usually treated as a good yield, and above 6% as very good. Yields vary a lot by region, with parts of the North of England and some cities running higher than London and the South East.
What is a good rental yield?
A good rental yield is generally around 5% to 6% gross, with anything above 6% treated as very good. In the UK, average yields sit between roughly 5% and 8%, so a figure in that range is healthy. What counts as good depends on the region and your strategy: higher-yield areas in the North of England can top 7% to 8%, while London and the South East often return 3% to 4% because buyers there weight capital growth over income. Always check the net yield, after costs, rather than the gross headline.
Is 7.5% a good rental yield?
Yes. A gross yield of 7.5% is above the UK average and would be considered a strong return. Check the net yield too, since higher-yielding areas can carry higher running costs or void risk that trims what you actually keep.
What is the difference between gross and net rental yield?
Gross yield uses the full annual rent against the property value and ignores costs. Net yield takes off the annual running costs first, so it reflects your real return. Net yield is always lower than gross, and it is the more honest figure for comparing properties.
What is the 2% rule for property?
The 2% rule is an American rule of thumb that says monthly rent should be at least 2% of the purchase price. It rarely holds in the UK, where yields are lower, so most landlords here work with rental yield percentages rather than the 2% rule.
Does rental yield include mortgage payments?
No. Rental yield measures the return on the property value and does not factor in mortgage interest, buying costs or Stamp Duty. To see the effect of a mortgage on your cash flow, work out your net income first, then look at your monthly repayments separately.
This tool is a guide, not financial advice.
