What Is Rental Yield?
Rental yield measures the annual return on a buy-to-let property as a percentage of its purchase price. It's the most important metric for property investors to understand whether a property will generate positive cash flow.
Gross vs Net Rental Yield — What's the Difference?
Gross rental yield is the annual rent divided by the property price, expressed as a percentage. It gives a quick comparison between properties but doesn't account for running costs.
Net rental yield deducts annual costs (maintenance, insurance, management fees, void periods) from the rent before calculating the percentage. This gives a more realistic picture of your actual return.
What Is a Good Rental Yield in the UK?
A gross yield of 5–8% is generally considered good in the UK. However, this varies significantly by region. Northern cities like Liverpool, Manchester and Sheffield often deliver higher yields (6–10%), while London properties may yield only 3–4% but benefit from stronger capital growth.
What Costs Should I Include?
- Mortgage interest — your biggest ongoing cost
- Letting agent fees — typically 8–12% of monthly rent
- Maintenance and repairs — budget 1–2% of property value per year
- Insurance — landlord building and contents cover
- Void periods — typically 1 month per year without tenants
- Service charges — for leasehold or flatted properties
How to Improve Your Rental Yield
- Negotiate a lower purchase price to reduce your capital outlay
- Add value through refurbishment to justify higher rents
- Reduce void periods with good tenant management
- Consider areas with strong rental demand and lower property prices
- Use our free property insight tool to find fairly-priced properties