How to Calculate Rental Yield (UK)
Gross rental yield = (annual rent ÷ purchase price) × 100. That's the whole formula — but the way you choose the rent figure, the price figure, and which costs you deduct decides whether your number reflects reality or flatters a bad deal. Here's how to do it properly, with two worked examples.
Step 1 — Gross yield
Worked example 1 — northern terrace: a 3-bed terrace in Liverpool listed at £150,000, with comparable properties renting at £950/month:
(£950 × 12) ÷ £150,000 × 100 = £11,400 ÷ £150,000 × 100 = 7.6% gross
Worked example 2 — London flat: a 1-bed flat at £420,000 renting for £1,750/month: (£21,000 ÷ £420,000) × 100 = 5.0% gross. Same formula, very different economics — see what counts as a good yield in each region.
Step 2 — Net yield
Typical running costs to deduct:
- Letting agent fees: 10–15% of rent (full management)
- Maintenance: budget ~1% of property value per year
- Landlord insurance: £150–£400/year
- Voids: assume 2–4 weeks empty per year
- Compliance: gas safety, EICR, EPC renewals
Re-running example 1: £11,400 rent − £1,368 agent (12%) − £1,500 maintenance − £250 insurance − £950 voids = £7,332 net. £7,332 ÷ £150,000 × 100 = 4.9% net. Note mortgage payments are conventionally excluded from net yield — they belong in your monthly cash flow, which the buy-to-let calculator works out for you.
The three mistakes that flatter bad deals
- Optimistic rent. Using the highest advertised rent on the street rather than the median of true comparables (same size, same condition). One overpriced listing isn't a market.
- Ignoring purchase costs. Stamp duty (with the additional-property surcharge), legal fees and any refurb are real money in the deal. Add them to the denominator for a true return-on-money-invested figure.
- Quoting gross when you mean net. A 7.6% gross deal netting 4.9% before finance is fine — as long as you knew that before you offered.
Frequently Asked Questions
What is the formula for rental yield?
Gross rental yield = (annual rent ÷ purchase price) × 100. For example, £950/month rent on a £150,000 property is (£11,400 ÷ £150,000) × 100 = 7.6% gross yield.
Should I use the asking price or my offer price?
Use the price you'll actually pay — your offer plus purchase costs if you want a conservative figure. Yields quoted on asking prices flatter the deal; if you negotiate 5% off, your real yield is higher than the listing suggests.
Do mortgage payments count in net yield?
Conventionally, no — net yield deducts running costs (agent fees, maintenance, insurance, voids) but not finance costs, because financing varies per buyer. Mortgage payments belong in your cash flow calculation instead. Be consistent, and check which definition any quoted 'net yield' uses.
What rent figure should I use if the property isn't let?
Use local comparables: what similar properties (same bedrooms, same streets) actually advertise for. DealFlow AI estimates this automatically from local listing data when you paste a Rightmove URL.
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