What is rental yield?
Rental yield is the annual rent expressed as a percentage of a property's value. Gross yield uses the rent before costs, while net yield deducts costs such as management, repairs and insurance. Investor buyers use yield to compare portfolios and decide what to offer.
Read more in our guide: How a portfolio appraisal works
Key facts at a glance
| Item | Detail |
|---|---|
| Gross yield | Annual rent ÷ property value × 100 |
| Net yield | (Annual rent − running costs) ÷ property value × 100 |
| Yield-based value | Annual rent ÷ buyer's required yield |
| Costs in a net yield | Management, repairs, insurance, compliance certificates, licences, service charges, ground rent and voids |
| Not usually in a net yield | Mortgage interest and tax |
| Higher yields usually mean | Lower prices relative to rent, and often more management or risk |
Gross and Net Yield: A Worked Example
A terraced house worth £160,000 lets for £800 a month.
| Annual rent | £9,600 |
| Gross yield | 6.0% |
| Less letting and management (12%) | −£1,152 |
| Less repairs and maintenance | −£800 |
| Less insurance | −£350 |
| Less gas, electrical and other compliance | −£300 |
| Less voids (2 weeks a year) | −£369 |
| Net income | £6,629 |
| Net yield | 4.1% |
The example is illustrative. HMOs usually show higher gross yields but also higher costs, as bills, furnishing and more intensive management are often included.
How Buyers Use Yield to Price Your Portfolio
Investor buyers often start with the yield they need and work back to a price. The same £9,600 rent produces very different prices depending on the buyer's target:
| Buyer's required gross yield | Implied price |
|---|---|
| 5.5% | £174,500 |
| 6.0% | £160,000 |
| 7.0% | £137,100 |
| 8.0% | £120,000 |
Required yields rise when interest rates rise, when properties need work, and in areas with weaker demand. They fall for well-let, low-maintenance properties in strong locations. That is why rents below market level, short or unstable tenancies and poor EPC ratings all reduce what investors will pay, and why a market appraisal looks at both the yield and the comparable sold prices.
Yield Is Not the Same as Return
Yield measures income against value. It ignores the mortgage, so it says nothing about your cash return on the money you have invested, and it ignores capital growth. A landlord with a 4% net yield and a large mortgage at 5% interest may be losing money each month, especially with Section 24 restricting tax relief on the interest. Comparing your net yield with what the equity could earn elsewhere is one way landlords decide whether to sell. For worked ROI, ROCE and profit examples, see Return on Investment (ROI) and Deal Calculations.
Improving Yield Before a Sale
- Review rents against the market, using the Section 13 procedure for any increase.
- Tidy up arrears and document the rent history.
- Have current compliance certificates and EPCs ready to show buyers.
- Present a clear rent schedule, so buyers price on facts rather than worst-case assumptions.
Official Sources and Further Reading
General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.
Frequently Asked Questions
Rental yield is the annual rent expressed as a percentage of a property's value. Gross yield uses the rent before costs, while net yield deducts costs such as management, repairs and insurance. Investor buyers use yield to compare portfolios and decide what to offer.
Gross yield is the annual rent divided by the property's value, times 100. Net yield deducts running costs such as management, repairs, insurance and voids from the rent first.
It depends on the area, the property type and the costs. Higher-yielding areas tend to have lower prices and sometimes higher risk, so investors compare net yields, not just gross yields.
Investor buyers often divide the annual rent by the yield they need to work out what to offer, so a higher required yield means a lower price for the same rent.
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