Rental Yield Guide: How to Calculate & What's a Good Return

Gross vs Net Yield

Gross rental yield = (Annual rent / Property value) x 100. Simple but doesn't account for costs.

Net rental yield = ((Annual rent - Annual costs) / Property value) x 100. A more accurate measure of real returns.

A property worth £200,000 renting at £1,000/month has a gross yield of 6%. After £3,000/year in costs, net yield drops to 4.5%.

Costs That Reduce Yield

• Mortgage payments (the biggest cost)
• Letting agent fees: 8-15% of rent
• Maintenance: budget 10-15% of rent
• Insurance: £200-400/year
• Void periods: typically 4-8 weeks between tenants
• Gas safety, electrical, and EPC certificates
• Ground rent/service charges (leasehold properties)

What's a Good Yield?

• Below 4%: Generally too low once costs are factored in
• 4-5%: Acceptable in high-capital-growth areas (London, South East)
• 5-7%: Good — the sweet spot for most investors
• 7%+: Excellent — often found in northern cities

Best Areas for Yield

Higher yields tend to be found in: Liverpool (6-8%), Manchester (5-7%), Nottingham (5-7%), Leeds (5-6%), and Birmingham (5-6%). London yields are typically 3-4% but benefit from stronger capital growth.

Yield vs Capital Growth

High-yield areas often have lower capital growth and vice versa. The best investment strategy depends on whether you want income now (high yield) or long-term wealth building (capital growth). Many investors balance both.