Rental yield is the annual rent from a property as a share of its value, and it is the measure landlords use to compare one property with another before anything else is known about it. It is a simple idea with two versions, gross and net, and most confusion about what a yield means comes from not knowing which version is being quoted. This page is for the UK buy-to-let landlord who wants the definition properly: what the number says, what it hides, how yields are quoted in listings and by agents, and how to read one. The rental yield calculator on this site works the figure from your own rent and price.
The definition
Take the rent the property earns in a year and divide it by what the property is worth or what it cost. Expressed as a percentage, that is the yield. A property bought for a certain price that lets for a certain monthly rent has one gross yield and nothing else about the property changes it: not the mortgage, not the landlord's tax position, not the agent's fee. That is why it is useful for comparison and why it is incomplete on its own.
Gross and net are two different numbers
Gross yield uses the full rent. Net yield subtracts the costs of holding and letting the property first: agent fees, insurance, service charge and ground rent, repairs, safety certificates, void weeks. The net figure is always lower and usually much lower. When someone quotes a yield without saying which, assume gross, and assume the net is what you will actually live on.
What a property rental yield tells you
A yield tells you how hard the property's price is working as an income. A higher yield means more rent per pound of value; a lower yield means the price is high relative to the rent, which often goes with areas where capital growth has been strong. Comparing yields across a shortlist tells you which properties carry themselves and which rely on growth to justify their price.
What a rental property yield hides
Yield says nothing about the tenant, the condition of the property, the risk of voids, the lease terms on a flat, or what the rent will do over time. It says nothing about the landlord's own finance or tax. A high yield in an area with long voids and heavy repairs can be a worse investment than a lower yield on a well-let flat. Read the yield first and the rest of the figures second, never the yield alone.
How uk rental yield is quoted
Agents and listings quote gross, almost always, because it is higher and simpler. A yield property advertised at a headline figure is quoting the asking rent against the asking price, both of which may move in your favour or against you. Rework the figure with achieved rent and the real costs before you believe it; the calculator here does the same arithmetic on your inputs so the comparison is on your terms.
Questions people ask about what is rental yield
What is a good rental yield?
It depends on the area, the property type and what you need the rent to cover. The good-yield page on this site walks the judgement; the calculator gives you the number to judge.
Is rent yield the same as return on investment?
No. Yield measures rent against the property's value. Return on investment measures your total gain, including growth and finance, against the cash you put in. The return page here covers the second.
Why do listings quote property yields that seem high?
Because they quote gross yield on asking rent and asking price. Rework it net with achieved rent and the yield usually falls.