Working out the yield on a property you already own is a different exercise from working it out on one you might buy. You have the rent roll, so the rent is achieved rather than asked; you have the year's costs, so the net figure is real rather than allowed for; and you have to decide whether to measure against what you paid or what the property is worth today, because the two answer different questions. This page is for the UK landlord calculating the yield on a let property, and it walks the steps from the rent roll to the figure and what to do with it. The rental yield calculator on this site takes the same inputs.
How to calculate yield on rental property: rent from the rent roll, not memory
Add up the rent actually received in the last twelve months per tenancy, including any weeks the property stood empty as zero. That figure already carries your real void period, which is the thing forecasts get wrong. If a tenancy changed mid-year, the rent roll shows both rents and the gap between them; use the total received.
Costs from the year, in the categories the return uses
Agent fees, insurance, service charge and ground rent, repairs and maintenance, safety certificates, and any other cost of letting, taken from the year's records. The categories are the same ones the self-assessment property pages ask for, so a landlord who keeps the accounts through the year has the net yield inputs ready at the same time as the tax figures. The landlord accounts tool on this site organises them that way.
How to calculate property yield: purchase price or today's value
Divide by what you paid, plus buying costs, and the yield tells you how the investment you made is performing. Divide by what the property is worth today and the yield tells you whether keeping the property is the best use of that value now. Both are legitimate; they answer different questions. Work both, label them, and never compare one landlord's cost yield with another's value yield.
What a falling yield on today's value means
If the value has risen faster than the rent, the yield on today's value falls even while the rent and the yield on cost are unchanged. That is not a problem with the property; it is a signal that the capital tied up in it could earn more elsewhere at current rents, or that the rent has room to move. Read it as information, not as alarm.
How to work out property yield honestly year after year
Use the same inputs each year, from the rent roll and the accounts, and record the figure against the property. A yield worked once from memory and never again is a story; a yield worked each year end from the record is a trend, and the trend is what tells you when to hold, re-let at a different rent or sell. RentRollDesk Pro keeps the rent roll and the saved figures per property at £9 per month; the free tools here do the arithmetic without an account.
Questions people ask about how to calculate yield on property
Should I calculate yield on property at purchase price or current value?
Both, labelled. Purchase price tells you how your investment is performing; current value tells you whether the capital is well used now.
How to work out yield on rental property with two tenancies in the year?
Total the rent actually received across both, including the void as zero, and use that annual figure. The rent roll gives it directly.
How often should a landlord recalculate property yield?
Once a year at year end from the accounts, and whenever the rent or the value changes materially.