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Rental Yield Calculator

Work out the gross yield, net yield and cash-on-cash return on a buy-to-let property, taking in all the real running costs and the mortgage.

Gross, net & cash-on-cash With or without a mortgage Real costs included

Investment details

£
Purchase costs
%

On a second property, Stamp Duty carries a buy-to-let surcharge (5% on top of standard rates since 31 October 2024). Add conveyancing fees, a survey and any mortgage arrangement fee.

Rental income
£/mth
%

Voids estimate the months with no rent coming in, plus unpaid rent. 5% works out at roughly 18 empty days a year.

Annual landlord costs
£/yr
£/yr
£/yr
£/yr
Buying with a mortgage?

Net annual yield

3.60%
On a total investment of £216,000
Gross yield5.40%
Monthly cashflow+£648.33/mth
Net annual income£7,780
Total investment£216,000

Indicative estimate before tax. This is not investment advice.

How to work out rental yield properly

The key ideas so the numbers don't fool you before you buy to let

Why gross yield misleads

Annual rent / price

Gross yield simply divides the annual rent by the purchase price. It ignores the purchase costs (Stamp Duty, legal fees), the annual landlord costs and void periods. A property at 6% gross can end up at 3% net in reality. Always compare on the net yield.

Example
A £200,000 flat let at £900/month: 5.40% gross, but 3.60% net once costs and voids are taken off.

The costs almost everyone forgets

Real annual costs

Letting agent or management fees, service charge and ground rent (on a leasehold flat), landlord insurance, gas safety and electrical certificates, small repairs, replacing white goods and the gaps between tenancies. Added up, they often knock 1 to 2 points off the yield. If the property needs work up front, add it to the total investment.

Example
Agent fees 1,080 + service charge 600 + insurance 300 + maintenance 500 = £2,480/year of fixed costs.

What void periods are

Months with no rent

This is the share of the year the property earns nothing: a change of tenant, weeks of marketing, redecorating between tenancies or rent arrears. Nobody collects 12 full months' rent every single year. A void allowance of 5% (around 2 to 3 weeks a year) is a sensible assumption; in areas with weak demand, use more.

Example
Rent of £900/month with a 5% void allowance: effective income of £10,260/year instead of £10,800.

What cash-on-cash is

If you buy with a mortgage

It measures the return on the money you actually put in yourself (deposit + costs), after taking the mortgage payment out of the income. It is the key figure for a leveraged investor: it tells you what your own capital earns, not the lender's. It can be higher or lower than the net yield depending on the interest rate.

Example
A £120,000 mortgage at 5.5% over 25 years: payment of £736.90/month and a cash-on-cash return of around -1.1% on £96,000 of your own money.

Frequently asked questions about rental yield

We answer the most common questions before buying to let

As a rough guide, gross yields on buy-to-let in the UK typically sit between 5% and 8%, which after costs usually works out at a net yield of 3% to 5%. Yields tend to be lower in London and the South East (where prices are high relative to rents) and higher in parts of the North and in cities with strong student or professional demand. A net yield above 4% to 5% is generally seen as attractive; below 3%, it is worth comparing with lower-effort options such as a Cash ISA, gilts or index funds. The right figure depends on the risk of the area, the condition of the property and your time horizon.
The gross yield simply divides the annual rent by the purchase price. The net yield takes off the void allowance and all the annual landlord costs (agent fees, service charge, insurance, maintenance) and measures them against the total investment, including the purchase costs. The net yield is always lower and it is the one you should use to decide: two properties with the same gross yield can have very different net yields depending on the service charge, the management arrangement or the condition of the building.
Rental profit is added to your other income and taxed at your Income Tax rate (20%, 40% or 45%), after your personal allowance. You work out the profit by deducting allowable expenses (letting agent fees, insurance, maintenance, service charge, ground rent) from the rent. Since the Section 24 changes, mortgage interest is no longer a deductible expense for individual landlords: instead you get a 20% tax credit on the interest, which means higher-rate taxpayers are worse off than before. The first £1,000 of rental income is covered by the property allowance. Holding the property through a limited company is taxed differently (Corporation Tax), which is why many landlords take advice on structure.
Arrears are a landlord's main risk: regaining possession through the courts can take many months, during which you receive nothing while still paying the service charge, insurance and mortgage. That is why this calculator includes a percentage for voids and arrears, and why it is worth taking out rent guarantee insurance (it usually costs a few per cent of the annual rent and requires the tenant to pass referencing). Referencing tenants properly and taking a deposit (protected in a government-approved scheme) reduces the risk considerably.
It comes down to leverage: if the net yield on the property beats the cost of the mortgage, borrowing amplifies the return on your own capital (a higher cash-on-cash return) and lets you spread your money across several properties. If the interest rate is high or the rent is tight, the payment can swallow the cashflow and even turn it negative, and leverage works against you. With buy-to-let rates well above the lows of recent years, always work out the cash-on-cash return and the monthly cashflow with the real payment before deciding.
A void is the share of the year the property earns no rent: gaps between tenancies, weeks of marketing, redecorating between tenants or arrears. 5% (around 2 to 3 weeks a year) is a prudent assumption in areas with strong demand; in places with weak rental demand, or for higher-end lets with a smaller pool of tenants, use 8% to 10%. Assuming 0% voids is the most common mistake when working out a yield.
There is no universal answer: it depends on the price you pay, the realistic rent for the area, the costs and how you finance it. The right way to answer is with numbers: work out the net yield (not the gross) and, if you use a mortgage, the cash-on-cash return and the monthly cashflow. Then compare it with liquid, hands-off options (a Cash ISA, gilts, index funds) and weigh up the extra risk: arrears, the Stamp Duty surcharge, the loss of mortgage interest relief, tighter regulation and the property being hard to sell quickly.

How to work out rental yield on a buy-to-let

Working out rental yield properly means going beyond the simple rent-to-price ratio. This calculator gives you three complementary figures: the gross yield (the quick number used to compare areas), the net yield (the one that takes off all the real costs and the voids) and the cash-on-cash return (the one that matters if you buy with a mortgage).

The three formulas

Gross yield = (Annual rent / Purchase price) x 100

Example: 10,800 / 200,000 x 100 = 5.40%

Net yield = ((Effective income - Annual costs) / Total investment) x 100

Example: (10,260 - 2,480) / 216,000 x 100 = 3.60% · Total investment = price + purchase costs

Cash-on-cash = ((Effective income - Costs - Annual mortgage payments) / Own capital) x 100

Own capital = total investment - amount borrowed

Effective income is the annual rent less the voids (rent x 12 x (1 - voids)). Annual costs add up the agent fees, service charge and ground rent, insurance and maintenance. The total investment includes the purchase costs: Stamp Duty (with the 5% buy-to-let surcharge on a second property), conveyancing, a survey and any mortgage fee. The mortgage payment is worked out on a repayment (capital and interest) basis.

Three example scenarios: cautious, middle and optimistic

For the same £200,000 property, small changes in the assumptions move the result a lot. These three scenarios show the sensible range (they are worked examples, not market data):

Item Cautious Middle Optimistic
Purchase price £200,000 £200,000 £200,000
Purchase costs 10% 8% 6%
Monthly rent £850 £950 £1,050
Voids 8% 5% 2%
Annual costs £2,900 £2,480 £2,100
Gross yield 5.10% 5.70% 6.30%
NET yield 2.95% 3.87% 4.83%

The lesson: between the cautious and the optimistic scenario there is nearly two points of difference on the same property. Before you buy, work out all three scenarios with your own figures and only go ahead if the cautious one still stacks up against more liquid, hands-off alternatives.

Is buy-to-let worth it? The answer is in the net yield

If you are wondering whether buy-to-let is worth it, the gross yield won't tell you: two properties with the same gross can have very different net yields depending on the service charge, the management set-up or the state of the building. Use the net yield to compare properties against each other and against other investments, and the cash-on-cash return and monthly cashflow to see whether the deal stands up with a mortgage. A negative cashflow means you are putting money in from your own pocket every month, betting on future capital growth to make up for it: a gamble, not an income.

Note: This calculator gives an indicative estimate before tax and is not investment advice. The tax treatment of rental income (Income Tax bands, the Section 24 interest restriction, allowable expenses) and changes in the market can significantly alter the real outcome. Speak to a tax adviser or financial adviser before making any investment decision.

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