Buy-to-Let Yield & Profit Calculator

Buy-to-Let Guide 2024

What's the difference between Gross and Net Yield?

Gross yield = (annual rent / property value) × 100. Quick first filter — but ignores all costs. Example: £200k property, £1,100 monthly rent. Gross yield = £13,200 / £200,000 = 6.6%. Healthy gross yield bands: northern UK and Wales: 7-10% achievable. Midlands: 5-7%. South East: 4-6%. Central London: 3-5%. Net yield = ((annual rent − annual costs) / property value) × 100. Costs include: management, maintenance, insurance, ground rent, service charges. Net yield typically runs 2-3 percentage points below gross yield once all costs are accounted for.

What's the key thing to understand about Section 24 — The Mortgage Tax Restriction?

Before 2017: BTL mortgage interest was fully deductible from rental income. After Section 24 (phased 2017-2020): mortgage interest no longer deductible. Instead, 20% tax credit on mortgage interest. Brutal impact for higher-rate taxpayers: 100% of rent counted as income (after non-mortgage costs). Only 20% credit on mortgage interest. Effective tax rate on rent: up to 75% in extreme cases. Limited company structure: limited companies still get full mortgage interest deduction. Many higher-rate landlords in high-mortgage, lower-yield areas have moved properties into limited companies for this reason, though doing so triggers capital gains tax and stamp duty on the transfer, so it rarely makes sense for a single existing property.

What's the key thing to understand about Other Costs to Plan For?

Letting agent fees: full management 10-15% of rent. Tenant find only: typically 1 month's rent. Maintenance: rule of thumb 10% of rent for general maintenance. New roof, boiler replacement, big repairs increase this significantly. Void periods: assume 1 month per year unoccupied. Particularly in higher-yield areas with more tenant turnover. Service charges and ground rent: flats only. Can be £1,000-3,000/year. Cladding-affected buildings can have catastrophic service charges. Insurance: £200-500/year for landlord buildings cover, more for high-value or higher-risk properties.

What do I need to know about Current Market Pressures?

Significant headwinds since 2020: mortgage rates rose from ~2% to 5%+. Section 24 fully active. Renters Reform Bill (when enacted) — abolishes Section 21 'no-fault' evictions. Energy efficiency: properties below EPC C may not be lettable from 2028 (proposed). Retrofit costs £5,000-25,000 for older properties. Capital growth: London essentially flat since 2016. Northern cities (Manchester, Leeds, Liverpool) have outperformed. BTL profitability: many older portfolios are barely cash-flow positive once mortgage interest, Section 24 tax changes, and rising compliance costs (EPC requirements, safety certificates) are all accounted for.

What's the key thing to understand about Gross vs Net Yield?

Gross rental yield — annual rent divided by property value — is the quickest way to compare properties, but it ignores the real costs of being a landlord and can make a property look far more profitable than it actually is. Net yield deducts those costs before dividing by property value: letting agent fees (often 10–15% of rent if fully managed), landlord insurance, ground rent and service charges on leasehold flats, routine maintenance and repairs, an allowance for void periods between tenants, gas safety checks and other compliance costs, and mortgage interest if the property is financed. The gap between gross and net yield can be substantial — a property advertised at an attractive 7% gross yield might only deliver 3–4% net once realistic costs are included, especially on leasehold flats with high service charges or older properties needing frequent repairs. Because gross yield is what's usually quoted in marketing material and portals, it's worth always recalculating net yield using your own realistic cost assumptions before comparing properties or deciding whether a purchase price is justified by the rental income it can realistically generate.

What should I know about Capital Growth vs Rental Income?

Buy-to-let returns come from two separate sources — rental income (yield) and capital growth (the property's value increasing over time) — and the right property, area, and strategy depend on which you're prioritising. High-yield properties, often in cheaper northern UK cities or regional towns, tend to generate strong monthly cash flow relative to purchase price, but historically slower long-term capital appreciation. Lower-yield properties in London and the South East have often delivered the opposite pattern: lower monthly income relative to price, but stronger long-term price growth, which only becomes a realised return when the property is eventually sold. Which matters more depends on your goals: an investor relying on the income now (to replace salary, for example) needs yield; someone building long-term wealth who doesn't need the income immediately may prioritise growth potential even at a lower starting yield. It's also worth remembering that mortgage interest tax relief for individual landlords has been restricted in recent years (relief given as a basic-rate tax credit rather than a full deduction against rental income for higher-rate taxpayers), which affects net returns differently depending on your own tax position and whether the property is held personally or through a limited company — a distinction worth checking with an accountant before buying.

Reference: Typical Gross Rental Yields by Region (UK, Broad Ranges)

These are broad illustrative ranges, not current live data — yields shift with both local house prices and achievable rents, and a specific postcode or even street can sit well outside its regional average, so these figures are a starting sanity check rather than a substitute for checking actual comparable rents and sale prices for a specific property.

Worked Example: Gross vs Net Yield on a Specific Property

A buy-to-let property is bought for £220,000 (including stamp duty surcharge and legal fees, say £228,000 all-in) and let for £1,000 a month, £12,000 a year. Gross yield = £12,000 / £220,000 = 5.45% Net yield accounts for costs: letting agent fees at 12% of rent (£1,440), insurance (£300), maintenance/repairs reserve at roughly 10% of rent (£1,200), service charge or ground rent if leasehold (£600), and void periods assumed at 4 weeks/year lost rent (£923): Total costs = £1,440 + £300 + £1,200 + £600 + £923 = £4,463 Net income before mortgage = £12,000 - £4,463 = £7,537 Net yield (on purchase price) = £7,537 / £220,000 = 3.43% That is a substantial 2 percentage point gap between gross and net yield purely from running costs — before even accounting for the mortgage interest cost, which, since the Section 24 changes, can no longer be deducted from rental income before calculating tax, only claimed as a 20% tax credit, often pushing the true after-tax, after-mortgage return meaningfully lower again for a higher-rate taxpayer with significant gearing.

How Void Periods and Agent Fees Quietly Erode Headline Yield

A property advertised at an attractive gross yield can look very different once realistic void periods and management costs are factored in. Even a well-managed let can sit empty for a few weeks between tenancies, and a letting agent typically charges somewhere in the region of 10-15% of rent for full management, more if tenant-find fees and renewal fees are added on top. A property generating £12,000 a year in theoretical full-occupancy rent might realistically deliver £11,000-£11,500 once a short void and agent fees are included, before mortgage costs are even considered. Landlords who self-manage save the agent fee but take on the time cost of finding tenants, handling repairs, and chasing rent, which is itself a real cost even if it doesn't appear in a yield calculation.

Using Yield Alongside Cash-on-Cash Return When You've Used a Mortgage

Gross and net yield are both calculated on the property's full value, but most landlords have only put down a deposit, so the return on the actual cash invested can look very different. A property worth £200,000 bought with a £50,000 deposit and generating £3,000 a year in net profit after mortgage interest and costs has a modest 1.5% net yield on the full property value, but a 6% cash-on-cash return on the £50,000 actually invested — and it's the cash-on-cash figure that's more comparable to returns from other investments like a savings account or index fund. Highly leveraged purchases amplify both the upside of cash-on-cash return and the downside risk if rates rise or rents fall, which is why lenders stress-test affordability well above the pay rate.