Rental Yield Calculator
Calculate gross yield, net yield, and monthly cashflow for any buy-to-let property. Adjust mortgage, management fees, and void periods to see your true return.
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Results are illustrative estimates based on the inputs you provide. Figures do not account for all landlord costs (repairs, lettings fees, landlord licensing, income tax). This tool does not constitute financial advice. Consult a qualified financial adviser before making investment decisions.
How Rental Yield Is Calculated
Gross yield is the simplest measure: annual rent divided by purchase price, expressed as a percentage. A property renting at £900/month with a purchase price of £200,000 delivers a gross yield of 5.4%.
Net yield (return on investment) accounts for real costs: management fees, void periods, and mortgage interest. It divides your net annual income by your total cash invested (deposit plus stamp duty). This gives a more realistic picture of your actual return.
A gross yield above 6% is generally considered good for buy-to-let. Learn more about gross vs net yield.
Worked Example: A £200,000 Property in Manchester
Let's work through a realistic scenario. You purchase a Manchester property (M11 postcode, 7.3% gross yield) at £200,000 with a 20% deposit (£40,000) and a 5-year fixed mortgage at 5.0% on the remaining £160,000.
| Item | Amount |
|---|---|
| Monthly rent (M11 local median) | £975 |
| Annual rent | £11,700 |
| Gross yield (£11,700 ÷ £200,000) | 5.85% |
| Annual Costs | |
| Management fees (10% of rent) | -£1,170 |
| Maintenance & repairs (1.5% of property value) | -£3,000 |
| Insurance (0.4% of property value) | -£800 |
| Void periods (2 months unlet per year) | -£1,625 |
| Mortgage interest (5.0% on £160,000) | -£8,000 |
| Total annual costs | -£14,595 |
| Net cashflow | -£2,895 |
| Return on investment (£40,000 deposit) | -7.2% |
Key insight: A 5.85% gross yield becomes a negative cashflow when you factor in all costs — a common trap for landlords. This property works best as a capital-growth play (expecting price appreciation to cover the annual shortfall). To achieve positive cashflow at 5.0% mortgage rates, you'd need either a higher gross yield (7%+) or a lower purchase price.
Common Calculation Mistakes
1. Ignoring mortgage interest. Many first-time landlords compare gross yield to mortgage rates directly ("5% yield beats 4% interest!"), forgetting that the cost is annual interest, not the outstanding balance. On a £160,000 loan at 5%, you pay £8,000/year — nearly your entire rent in the example above.
2. Underestimating void periods. The saying "a property is always rented" is dangerously optimistic. Budget for 2–5% of rents lost to turnover, re-letting, and tenant default. In competitive northern markets, assume 2–3%; in tighter southern markets with lower yields, void periods can exceed 5%.
3. Forgetting running costs. Management fees, maintenance, and insurance typically claim 2–3% of the property value annually. Many calculators show only mortgage interest and overlook these, inflating net returns by £3,000–£5,000 per property.
4. Missing Section 24 tax. If you're a higher-rate taxpayer, Section 24 interest-limitation means you pay income tax on notional rental profit even if you operate at a loss. This can add an effective 2–3 percentage points to your cost of borrowing. Use our calculator with higher-rate settings to see the true impact.
How to Use This Calculator for Better Decisions
Scenario testing: Run the same property three times—once at your best-case rent estimate, once at the local median, and once 10% below median. If the property still delivers positive cashflow in scenario 2, you have a margin of safety.
Rate stress testing: Calculate net yield assuming your mortgage rate rises to 6% or 7% at the next remortgage (5 years ahead). If the property becomes unprofitable, it's too leveraged for your risk tolerance.
Geographic comparison: Use our top 50 yields ranking to find local medians for your target city, then cross-check with Rightmove and OpenRent for realistic rent expectations.
Deposit sizing: Lower deposits (15–20% LTV) increase mortgage costs; higher deposits (30%+ LTV) reduce mortgage debt and improve cashflow. The calculator shows how deposit size directly impacts net return — useful when deciding whether to buy one property with 25% down or two with 15% down.