Rental yield is the key metric for evaluating a buy-to-let investment — but quoting only gross yield can be dangerously misleading. A property with 7% gross yield might deliver just 3–4% net yield after costs. This guide explains how to calculate both, what figures to use, and what yield you should be targeting in 2026.
Gross Rental Yield
Gross yield is the simplest calculation — it ignores all costs:
Gross Yield = (Annual Rent ÷ Property Value) × 100
Example: £14,400 annual rent ÷ £220,000 property value × 100 = 6.5% gross yield
Gross yield is useful for quickly comparing properties and screening opportunities — but always calculate net yield before making investment decisions.
Net Rental Yield
Net yield deducts all annual costs from rental income before calculating the percentage:
Net Yield = [(Annual Rent − Annual Costs) ÷ Property Value] × 100
What Annual Costs to Include
| Cost | Typical Amount | Notes |
|---|---|---|
| Letting agent fee | 10–15% of rent | Full management; optional |
| Mortgage interest | Depends on LTV/rate | Section 24 now limits relief to basic rate |
| Buildings insurance | £200–400/year | Landlord policy essential |
| Ground rent / service charge | £0–3,000/year | Leasehold flats only |
| Maintenance / repairs | 1% of property value/year | Budget rule of thumb |
| Void periods | 1–2 months rent/year | Conservative estimate |
| Gas safety / EICR | £150–300/year | Legally required checks |
| Accountancy | £300–600/year | Tax return preparation |
Worked Example: Net Yield Calculation
Property: £220,000 purchase price, renting at £1,200/month (£14,400/year)
| Income/Cost | Annual |
|---|---|
| Gross rent | £14,400 |
| Letting agent (12%) | −£1,728 |
| Buildings insurance | −£300 |
| Maintenance (1%) | −£2,200 |
| Void allowance (1 month) | −£1,200 |
| Gas safety + EICR | −£250 |
| Accountancy | −£400 |
| Net annual income | £8,322 |
| Net yield | 3.8% |
The gross yield was 6.5%; net yield is 3.8% — a significant difference. This 3.8% must also compete against mortgage interest costs and be evaluated against capital growth expectations.
UK Regional Yield Comparison (2025)
| Region | Avg Gross Yield | Avg Property Value |
|---|---|---|
| Greater London | 3.5–4.5% | £500,000+ |
| South East | 4–5% | £350,000–£450,000 |
| Birmingham / West Midlands | 5.5–7% | £200,000–£260,000 |
| Manchester | 5.5–7.5% | £190,000–£280,000 |
| Liverpool | 7–9% | £130,000–£200,000 |
| Yorkshire | 6–8% | £160,000–£220,000 |
| Scotland (Glasgow) | 7–10% | £130,000–£180,000 |
What Is a Good Rental Yield?
A net yield of 4–6% is generally considered good in the UK (2025), with anything above 6% net either reflecting higher risk (management intensive, lower quality areas) or a genuine opportunity. Below 3% net — common in London — requires a strong capital growth thesis to justify the investment. Always model the cashflow position (monthly rent minus mortgage payment minus costs) to ensure the property doesn't become a monthly cash drain.