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What is rental yield? Gross vs net, with a worked example

What is rental yield? Gross and net yield formulas, a worked example with illustrative figures, and what each measure leaves out for landlords.

4 min read
Last reviewed 4 November 2026
By Your Property Check team

Part 1 of 8

The two measures

General information, not advice. Rental yield compares the income from a let property with its price. Landlords and investors use it to compare properties on a like-for-like basis. There are two common versions, and they answer different questions.

Measure	Formula	Example	What it leaves out
Gross yield	Annual rent divided by price, times 100	£12,000 / £200,000 = 6.0%	Every running cost, empty periods, mortgage interest, tax
Net yield	(Annual rent minus annual costs) divided by price, times 100	(£12,000 - £3,000) / £200,000 = 4.5%	Mortgage interest, tax, and any buying costs unless you add them to the price

All pounds on this page are illustrative. They are not market figures, and they are not a forecast of what any property will earn.

Part 2 of 8

Worked example, step by step

Take an illustrative home bought for £200,000 and let at £1,000 a month.

Annual rent: £1,000 x 12 = £12,000.
Gross yield: £12,000 / £200,000 = 0.06, or 6.0%.
Annual running costs, illustrative: assume £3,000 for things like insurance, repairs, management and service charges. Your own list will differ.
Net income: £12,000 - £3,000 = £9,000.
Net yield: £9,000 / £200,000 = 0.045, or 4.5%.

Now add realism. If the home is empty for one month, rent for the year is £11,000 and the gross yield is 5.5%. If you also count £8,000 of illustrative buying costs, the total cost is £208,000 and the net yield on that is £9,000 / £208,000, about 4.3%. The same property gives three different answers depending on what you include, which is why you should always say which measure you quote.

Part 3 of 8

Which price to divide by

Use one consistent denominator. Many people divide by the purchase price because it is simple and comparable. A fuller view divides by everything you put in, including buying costs and any refurbishment, which lowers the yield but is closer to the return on your cash. If you bought with a mortgage, the yield on the property is separate from the return on your deposit, because borrowing changes what you earn on the money you put in. Write down which choice you made, so that two properties compared side by side use the same basis.

Part 4 of 8

What a good yield is

There is no official benchmark. We did not find a figure in the sources we read, and a good yield for one landlord is poor for another. It depends on your costs, your borrowing, your tax position, how much risk and effort you accept, and whether you also expect the price to grow. Use yield to compare similar properties, not as a pass mark.

Part 5 of 8

Why gross can mislead

Gross yield is simple, which is its use and its trap. It ignores costs that can be large. A property with a high gross yield may have high costs, such as repairs, management or more frequent empty periods. Net yield is closer to what you keep, but it still leaves out mortgage interest and tax. Mortgage costs need their own test, and our buy-to-let stress test is built for that. Tax rules, including the treatment of mortgage interest, can change your return; check HM Revenue and Customs guidance or take advice, as we did not read the tax pages for this article and state no rates.

Part 6 of 8

Rent is not fixed

Yield on a spreadsheet assumes rent stays put, but rent is set by the tenancy and the law. GOV.UK's guide to the Renters' Rights Act says it came into effect in England on 1 May 2026, that landlords must use Form 4A to raise rent, with at least two months' notice, and that rent can be increased no more than once a year. So yields in England cannot be raised at will. Rules in Scotland and Wales differ; check the government guidance for your nation.

GOV.UK also notes that the type of tenancy changes how you or your tenant can end it. Understand which tenancy applies before you rely on a rental income assumption. Our guide to EPC rules for landlords covers a cost that can affect lettings.

Part 7 of 8

Using real rents

The Office for National Statistics publishes the Price Index of Private Rents, which gives price levels and annual changes for private rents by area. Use it to sense-check a rent assumption against your area, then look at real adverts nearby. Our ROI calculator lets you enter your own price, rent and costs and see yield and return side by side.

Part 8 of 8

A checklist before you rely on a yield

Say whether it is gross or net, and what you counted as costs.
Include an allowance for empty months.
Add buying costs to the price if you want a true return on cash spent.
Test the figure against the mortgage, not just the property.
Check the rent against comparable lets in the area.
Run your own numbers in the free property deal analyser.

This page is general information, not advice.

Our take

Say whether the yield is gross or net

Our view: a yield figure means little until you know what it counts. On our illustrative £200,000 home let at £1,000 a month, gross yield is 6.0% and net yield after £3,000 of costs is 4.5%. Both leave out mortgage interest and tax, so test the borrowing separately.

What Your Property Check adds: the free property deal analyser is a BTL, HMO and BRR ROI calculator anchored to a value range, so you can try your own price, rent and costs. The figures on this page are illustrations, not market data.

Analyse a deal

Our opinion, drawn from the facts on this page: not advice and not a forecast. We earn from OfferCheck reports and from introducing sellers to cash buyers, so weigh it with that in mind (see our disclosure). We are not authorised or regulated by the FCA.

Questions, answered

Frequently asked questions

What is rental yield?

It is a year's rent as a percentage of the property's price. For an illustrative £200,000 home let at £12,000 a year, the gross yield is 6.0%.

How do you calculate rental yield?

Gross: annual rent divided by price, times 100. Net: annual rent minus annual running costs, divided by price, times 100. Always say which one you mean and what you counted as costs.

What is a good rental yield?

There is no official benchmark. It depends on your costs, borrowing, tax, risk and whether you expect the price to grow, so use yield to compare similar properties rather than as a pass mark.

What is the difference between gross and net yield?

Gross yield uses rent before any costs. Net yield deducts running costs first, so it is lower and closer to what you keep. Neither includes mortgage interest or tax unless you add them.

Can I raise the rent to improve my yield?

In England GOV.UK says rent increases need Form 4A with at least two months' notice, and no more than once a year. Check the rules for your nation and tenancy.

Where this comes from

Sources

Last reviewed 4 November 2026 by the Your Property Check team. This page is general information, not legal, tax or financial advice. For your own situation, speak to a conveyancing solicitor or another qualified professional.