In this article
Buy-to-let yield is a simple way of measuring how much rental income a property generates compared to its value.
Landlords often use yield when comparing properties, assessing potential purchases, or reviewing the performance of an existing rental property.
While yield is only one part of the picture, it can provide a useful starting point when deciding whether a property is likely to meet your expectations.
How Do You Calculate Gross Yield?
Gross yield measures rental income before any costs or expenses are deducted.
The calculation is:
Annual Rental Income ÷ Property Value × 100 = Gross Yield (%)
For example, if a property is worth £200,000 and generates £10,000 in rent each year:
£10,000 ÷ £200,000 × 100 = 5%
This gives the property a gross yield of 5%.
Gross yield is useful because it provides a quick way to compare different properties.
Many landlords use it as an initial screening tool before looking more closely at the property’s wider costs and potential returns.
How Do You Calculate Net Yield?
Net yield takes the calculation a step further by accounting for ongoing expenses.
The calculation is:
(Annual Rental Income – Annual Expenses) ÷ Property Value × 100 = Net Yield (%)
Using the same property, if annual expenses total £3,000:
(£10,000 – £3,000) ÷ £200,000 × 100 = 3.5%
This results in a net yield of 3.5%.
Many landlords view net yield as a more realistic measure because it reflects the costs involved in running a rental property rather than focusing solely on the rent being received.
What Expenses Should Be Included?
The expenses included within a net yield calculation will vary between properties, though common costs include landlord insurance, maintenance, letting agent fees, service charges, ground rent, and periods where the property may be vacant.
Some landlords also choose to factor mortgage costs into their calculations to gain a clearer understanding of the property’s overall performance.
If you’re financing a purchase, a buy-to-let mortgage calculator can help estimate potential mortgage payments before comparing them against the expected rental income.
What is Considered A Good Buy to Let Yield?
There is no single figure that guarantees a good investment.
A property with a higher yield may generate stronger rental income, while another property with a lower yield may benefit from stronger long-term house price growth.
The right balance will often depend on your objectives as a landlord and the type of property you are purchasing.
Our mortgage advisors regularly speak to landlords who are comparing different opportunities and assessing how a property’s rental income fits alongside their mortgage arrangements and long-term plans.
Should You Rely On Yield Alone?
Yield is a useful measurement, though it should not be the only factor considered when assessing a property.
Rental demand, property condition, future maintenance costs, local market conditions, and mortgage costs can all influence how successful a buy-to-let property may be over time.
Many landlords use yield as a starting point before looking more closely at the wider financial picture, helping them build a clearer understanding of a property’s overall potential.
