{"id":1002,"date":"2026-04-10T16:09:09","date_gmt":"2026-04-10T16:09:09","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/knowledge\/articles\/how-to-work-out-rental-yield-for-uk-properties\/"},"modified":"2026-05-11T11:27:24","modified_gmt":"2026-05-11T11:27:24","slug":"how-to-work-out-rental-yield-for-uk-properties","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/rental\/how-to-work-out-rental-yield-for-uk-properties\/","title":{"rendered":"What is rental yield? and how do you calculate it?"},"content":{"rendered":"\n

Understanding rental yield is crucial for managing your property sustainably. It helps you understand whether a property is a good investment, and if you\u2019ll be able to cover the costs of the property. <\/p>\n\n\n\n

Our guide explains what rental yield is, why it matters, and how to calculate it.<\/p>\n\n\n\n

What is rental yield?<\/strong><\/h2>\n\n\n\n

Rental yield is the financial return you make on a property investment through rent. It’s expressed as a percentage of the property value.<\/p>\n\n\n\n

Landlords use rental yield to understand the financial performance of their property and to make sure it remains a sustainable investment.<\/p>\n\n\n\n

Why does rental yield matter?<\/strong><\/h2>\n\n\n\n

A good rental yield helps make sure your rental income can cover your expenses. And allows you to afford necessary maintenance, stay on top of safety regulations so your property remains a safe and comfortable home for your tenants.<\/p>\n\n\n\n

Beyond covering expenses, rental yield is also a key indicator of your property’s overall financial health. A strong yield provides a buffer against unexpected costs so you can adapt to circumstances like repair emergencies or periods of vacancy.<\/p>\n\n\n\n

It also impacts your ability to secure financing for future investments, as lenders often assess yield when determining loan amounts and terms.<\/p>\n\n\n\n

What is the difference between gross and net rental yield?<\/strong><\/h2>\n\n\n\n

Gross rental yield looks at your return before any expenses are deducted. It uses the property price and your total rental income.<\/p>\n\n\n\n

Net rental yield gives a more accurate picture of your actual rental yield because it includes all your property expenses.<\/p>\n\n\n\n

How to calculate gross rental yield<\/strong><\/h3>\n\n\n\n

Calculating your gross yield is simple. Just follow these three steps:<\/p>\n\n\n\n

    \n
  1. Multiply your monthly rent by 12 to find your annual rental income.<\/li>\n\n\n\n
  2. Divide your annual rental income by the property purchase price.<\/li>\n\n\n\n
  3. Multiply that figure by 100 to get your gross rental yield percentage.<\/li>\n<\/ol>\n\n\n\n

    Example of a gross rental yield calculation<\/strong><\/h3>\n\n\n\n

    If you buy a property for \u00a3200,000 and charge \u00a31,000 a month in rent. Your annual rental income is \u00a312,000.<\/p>\n\n\n\n

    Divide \u00a312,000 by \u00a3200,000, which gives you 0.06. Then multiply this by 100, and your gross rental yield is 6%.<\/p>\n\n\n\n

    How to calculate net rental yield<\/strong><\/h3>\n\n\n\n

    Net rental yield shows your true return by factoring in the costs of being a conscientious landlord. Here is how to calculate it:<\/p>\n\n\n\n

      \n
    1. Multiply your monthly rent by 12 to get your annual rental income.<\/li>\n\n\n\n
    2. Subtract your annual costs, such as mortgage payments, maintenance, and insurance.<\/li>\n\n\n\n
    3. Divide this number by the property purchase price.<\/li>\n\n\n\n
    4. Multiply the result by 100 to find your net rental yield percentage.<\/li>\n<\/ol>\n\n\n\n

      Example of a net rental yield calculation<\/strong><\/h3>\n\n\n\n

      So for a \u00a3200,000 property with a \u00a312,000 annual rental income, where you spend \u00a36,000 a year on mortgage payments, repairs, and insurance. Your net rental income is \u00a38,000.<\/p>\n\n\n\n

      Divide \u00a38,000 by \u00a3200,000 to get 0.04. Multiply this by 100, and your net rental yield is 4%.<\/p>\n\n\n\n

      What is a good rental yield?<\/strong><\/h2>\n\n\n\n

      In the UK, the average rental yield usually sits between 5% and 8%. A gross yield of around 5% to 6% is generally considered good, while anything above 7% is very good.<\/p>\n\n\n\n

      The right yield for you depends on your location and property type. Ultimately, a good net rental yield must comfortably cover all your expenses while providing a solid return on investment.<\/p>\n\n\n\n

      What is capital growth and how is it calculated?<\/strong><\/h2>\n\n\n\n

      Capital growth, or capital appreciation, is the increase in your property value over time. You calculate it by comparing the current market value to your original purchase price.<\/p>\n\n\n\n

      This percentage shows your return on investment from a property value perspective. Keep in mind that you may need to pay capital gains tax when you eventually sell a profitable buy-to-let property.<\/p>\n\n\n\n

      Example of a capital growth calculation<\/strong><\/h3>\n\n\n\n

      If a \u00a3200,000 property increases in value to \u00a3250,000 after five years. Your property price increase is \u00a350,000.<\/p>\n\n\n\n

      Divide \u00a350,000 by \u00a3200,000 to get 0.25. Multiply this by 100, and your capital growth is 25%.<\/p>\n\n\n\n

      More guides for buy-to-let landlords<\/h3>\n\n\n\n