Finance⏱ 6 min read
How to Calculate Rental Yield on a Buy-to-Let Property
Gross yield is what estate agents show you. Net yield is what actually matters. Here's how to calculate both, what a good yield looks like across the UK, and why cash-on-cash return is the most honest measure.
Buy-to-let property is often sold on the promise of a high rental yield — but the headline figure and the reality after costs can be very different numbers. Here's how to calculate each measure correctly.
Gross Yield
The most commonly quoted figure. Easy to calculate, and easy to misuse because it ignores all costs.
Gross Yield % = (Annual Rent ÷ Property Value) × 100
Property worth £180,000, renting for £900/month:
Annual rent = £900 × 12 = £10,800
Gross yield = (10,800 ÷ 180,000) × 100 = 6.0%
Net Yield
The more meaningful figure — it deducts all costs of ownership from the annual income before dividing by property value.
Net Yield % = ((Annual Rent − Annual Costs) ÷ Property Value) × 100
Typical annual costs:
- Letting agent fees: 8–15% of rent (£864–£1,620)
- Maintenance and repairs: 1% of property value (£1,800)
- Landlord insurance: ~£200
- Void periods (1 month/year average): −£900
- Mortgage interest (if mortgaged): varies
Example (without mortgage, 10% agent, 1 void month):
Annual income: £10,800
Agent fees: £864 + insurance £200 + maintenance £1,800 + void £900
Total costs: £3,764
Net income: £10,800 − £3,764 = £7,036
Net yield = (7,036 ÷ 180,000) × 100 = 3.9%
The drop from 6.0% gross to 3.9% net is typical. When estate agents advertise yields, they almost always mean gross yield.
Cash-on-Cash Return (The Most Honest Measure)
If you buy with a mortgage, the relevant measure isn't yield on total property value — it's return on your actual cash invested (the deposit plus buying costs).
Cash-on-Cash Return = Annual Cash Flow ÷ Total Cash Invested × 100
Total cash invested:
Deposit (25%): £45,000
Stamp duty: £6,500
Legal and survey fees: £2,500
Total invested: £54,000
Annual mortgage cost (£135,000 at 5%, 25yr): ~£9,400
Net income after mortgage: £7,036 − £9,400 = −£2,364
Negative cash flow means the property costs money to hold
(common in London/SE with current rates and prices)
This calculation reveals why many BTL investors have sold up since 2022 — rising mortgage rates turned positive cash flow positions negative, and the tax changes (phased reduction of mortgage interest relief) made it worse.
Yield by UK Region
RegionAverage Gross YieldNet Yield (est.)
North East England7–9%4–6%
Yorkshire / Humber6–8%3.5–5.5%
North West England6–8%3.5–5.5%
Midlands5–7%3–4.5%
South East3.5–5%1.5–3%
London2.5–4%0.5–2%
Higher-yield areas tend to have lower capital growth. London offers the opposite. Neither is categorically "better" — it depends on your investment goals, tax position, and time horizon.
The Full BTL Return
Total annual return = Net yield + Capital growth rate
If the property grows 3%/year in value:
Net yield 3.9% + capital growth 3% = 6.9% total return
On the full property value — not just the cash invested.
On cash invested (with leverage), the return is much higher,
which is both the appeal and the risk of using a mortgage.