Rental Yield Calculator
Calculate the true rental yield on any buy-to-let property — both gross (before costs) and net (after all expenses). Includes realistic cost estimates for maintenance, voids, and management fees.
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Rental Yield Guide
What's the difference between Gross and Net Yield?
Two key yield measures: Gross yield = (annual rent / property price) × 100. Simple headline figure. Ignores all costs. Net yield = (annual rent - annual costs) / property price × 100. Accounts for running costs. More realistic. UK gross yield benchmarks (2024): under 4%: low (typical London, South East). 4-6%: moderate (much of England). 6-8%: good (Northern England, Wales, Scotland cities). 8%+: high (some Northern towns, student areas, HMOs). Net yield typically runs 2-3 percentage points below gross yield once costs are factored in.
Why Net Yield Matters More?
Costs that reduce real returns: mortgage interest (biggest cost for leveraged purchases). Letting agent fees (8-15% of rent for full management). Maintenance and repairs (budget 1% of property value/year minimum). Landlord insurance. Gas safety certificates, EICR electrical checks (legal requirements). Service charges/ground rent (leasehold flats). Void periods (no rent between tenancies). Ongoing compliance costs (EPC, deposit protection, Right to Rent checks). Hidden costs people forget: boiler and appliance repairs, garden maintenance if not the tenant's responsibility, and periodic redecoration between tenancies.
What do I need to know about Section 24 Tax Changes?
Major tax change since 2017: Section 24 restricts mortgage interest relief for individual landlords. Old rules (pre-2017): could deduct full mortgage interest from rental income before tax. New rules (fully in force since April 2020): no longer deduct mortgage interest as expense. Instead, get a 20% tax credit on mortgage interest. Impact on higher-rate taxpayers: previously: rent minus all costs (inc. interest) = profit, taxed at 40%. Now: rent minus costs (excluding interest) = higher 'profit'
What do I need to know about Return on Investment (ROI)?
ROI measures return on actual cash you've invested (not the full property value). ROI = annual profit / total cash invested × 100. Total cash invested = deposit + purchase costs (SDLT, legal, survey) + initial works. Why ROI matters: leverage (mortgage) means you control a large asset with relatively little cash. £200,000 property with £50,000 deposit: if it generates £4,000 annual profit, that's 8% ROI on your £50,000 cash (vs 2% yield on the £200,000 property value). Leverage amplifies both returns and risk — the same principle that boosts ROI on a mortgaged property also means a fall in property value or a bad void period hits your cash return proportionally harder.