Rental Yield Calculator UK: How to Calculate & What's Good
Learn how to calculate gross and net rental yield for UK properties. What is a good yield, regional yield comparisons, and how to maximise your returns.
The Latch Team
Editorial
Rental yield is the single most important metric for evaluating a buy-to-let investment. It tells you how much income a property generates relative to its value, expressed as a percentage. Yet many landlords either calculate it incorrectly or rely solely on gross yield without understanding the significant difference net yield can make to their actual returns.
Whether you are assessing your first buy-to-let purchase or comparing properties across different UK regions, understanding how to calculate rental yield accurately is fundamental. Get it wrong and you could invest in a property that looks attractive on paper but delivers disappointing real-world returns after costs are factored in.
This guide walks you through both gross and net rental yield formulas with worked examples at different price points, explains what constitutes a good yield in 2026, and shows how Latch can track your actual yield performance across your portfolio in real time.
What Is Rental Yield?
Rental yield is a measure of the annual rental income a property produces as a percentage of its purchase price or current market value. It is the property investor's equivalent of a dividend yield on shares or an interest rate on a savings account. A higher yield means the property generates more income relative to its cost.
There are two types of rental yield that every landlord should understand: gross yield and net yield. Gross yield is the simpler calculation and is useful for quick comparisons between properties. Net yield accounts for costs and gives you a more realistic picture of actual returns.
Gross Rental Yield Formula
Gross rental yield is the most commonly quoted figure because it is simple to calculate and easy to compare across properties. The formula is:
Gross Rental Yield = (Annual Rental Income / Property Value) x 100
For example, a property worth £200,000 generating £12,000 per year in rent has a gross yield of 6.0%.
Gross yield is what estate agents and property portals typically advertise. It is useful for initial screening of potential investments, but it tells you nothing about the actual profit you will make because it ignores all costs.
Net Rental Yield Formula
Net rental yield accounts for the costs of owning and running a rental property. This is the figure that actually matters for your investment return. The formula is:
Net Rental Yield = ((Annual Rental Income - Annual Costs) / Property Value) x 100
Annual costs include: mortgage interest, insurance, management fees, maintenance, void periods, letting agent fees, ground rent, service charges, and compliance costs.
The gap between gross and net yield is typically 2 to 4 percentage points. A property with a 7% gross yield might deliver only a 3.5% to 4.5% net yield once all costs are factored in. This is why comparing properties on gross yield alone can be misleading.
Worked Examples at Different Price Points
Let us work through three realistic examples at different property price points to illustrate how gross and net yields compare in practice.
Example 1: Northern Terrace (£120,000)
| Item | Amount |
|---|---|
| Purchase price | £120,000 |
| Monthly rent | £650 |
| Annual rent | £7,800 |
| Gross yield | 6.5% |
| Annual costs breakdown | |
| Mortgage interest (75% LTV, 5.2%) | £4,680 |
| Insurance | £300 |
| Maintenance reserve (10% of rent) | £780 |
| Void allowance (1 month) | £650 |
| Gas safety, EICR, EPC | £200 |
| Total annual costs | £6,610 |
| Net annual income | £1,190 |
| Net yield | 1.0% |
Key insight: This property looks attractive at 6.5% gross yield, but after mortgage costs and expenses the net yield is just 1.0%. However, the tenant is also paying down your mortgage, and capital growth compounds over time. Cash flow is tight but total return including equity growth may still be worthwhile.
Example 2: Midlands Semi-Detached (£200,000)
| Item | Amount |
|---|---|
| Purchase price | £200,000 |
| Monthly rent | £950 |
| Annual rent | £11,400 |
| Gross yield | 5.7% |
| Annual costs breakdown | |
| Mortgage interest (75% LTV, 5.2%) | £7,800 |
| Insurance | £350 |
| Maintenance reserve (10% of rent) | £1,140 |
| Void allowance (1 month) | £950 |
| Gas safety, EICR, EPC | £200 |
| Letting agent (10% of rent) | £1,140 |
| Total annual costs | £11,580 |
| Net annual income | -£180 |
| Net yield | -0.1% |
This example shows how a property with a seemingly reasonable 5.7% gross yield can actually produce a negative cash flow when a letting agent is involved and mortgage rates are elevated. At today's interest rates, many properties in the £200,000 to £300,000 range require careful cost management to remain cash-flow positive.
Example 3: Cash Purchase — No Mortgage (£200,000)
| Item | Amount |
|---|---|
| Purchase price | £200,000 |
| Monthly rent | £950 |
| Annual rent | £11,400 |
| Gross yield | 5.7% |
| Annual costs (no mortgage) | |
| Insurance | £350 |
| Maintenance reserve | £1,140 |
| Void allowance | £950 |
| Compliance costs | £200 |
| Total annual costs | £2,640 |
| Net annual income | £8,760 |
| Net yield | 4.4% |
Without a mortgage, the same property delivers a 4.4% net yield. This illustrates why mortgage interest is typically the largest single cost for leveraged investors and why the current interest rate environment has such a significant impact on buy-to-let returns.
What Is a Good Rental Yield in 2026?
What counts as a good yield depends on the type of property, its location, and your investment strategy. Here is a general guide for UK buy-to-let in 2026:
| Gross Yield | Rating | Typical Locations |
|---|---|---|
| Below 4% | Poor — unlikely to cash-flow | Prime London, affluent South East |
| 4% to 5% | Below average — tight margins | Outer London, commuter towns, South |
| 5% to 6% | Average — workable with low costs | Midlands cities, mid-tier Southern towns |
| 6% to 7% | Good — solid cash flow potential | Northern cities, university towns |
| 7% to 8% | Very good — strong returns | Northern terraces, regeneration areas |
| 8% to 10% | Excellent — but check the risks | Student HMOs, high-density areas |
| Above 10% | Exceptional — verify carefully | Often too good to be true; check voids, condition, area |
Rule of thumb for 2026: With mortgage rates around 5%, you generally need a gross yield of at least 6% for the property to be cash-flow positive after all costs. Below 5.5% gross, you are likely relying on capital growth rather than income.
Gross Yield vs Net Yield: Why the Difference Matters
Many new investors focus exclusively on gross yield because it is the figure most commonly advertised. This can lead to poor investment decisions. Consider two properties:
| Metric | Property A | Property B |
|---|---|---|
| Price | £150,000 | £150,000 |
| Monthly rent | £800 | £750 |
| Gross yield | 6.4% | 6.0% |
| Service charge | £1,800/year | £0 |
| Ground rent | £300/year | £0 |
| Net yield (before mortgage) | 4.6% | 5.0% |
Property A has a higher gross yield, but Property B delivers a better net yield because it has no service charges or ground rent. Always dig beneath the headline figure.
Factors That Affect Your Actual Yield
- Void periods: Every month without a tenant directly reduces your actual yield. A single month void on a 6% gross yield property reduces it to 5.5%
- Maintenance costs: Older properties often have higher maintenance bills that erode net yield. Budget 10% to 15% of annual rent for maintenance
- Mortgage interest rate: The single biggest variable for leveraged investors. A 1% rate increase on a £150,000 mortgage costs an additional £1,500 per year
- Letting agent fees: Full management typically costs 10% to 15% of rent. Self-managing saves this cost but requires your time
- Insurance: Landlord insurance, rent guarantee insurance, and buildings insurance are essential but reduce net yield
- Compliance costs: Gas safety certificates, EICRs, EPC assessments, and deposit protection all add up annually
- Service charges and ground rent: Leasehold flats can have service charges of £1,000 to £3,000 or more per year
How to Improve Your Rental Yield
If your current yield is below target, there are practical steps you can take to improve it:
Increase Rent
Review comparable rents in your area. Many landlords under-charge because they have not reviewed rents for several years. A Section 13 notice allows you to increase rent once per year.
Quick win
Reduce Void Periods
Market the property before the current tenant leaves, price competitively, and maintain the property well to encourage lease renewals. Even reducing voids by two weeks per year improves yield.
High impact
Self-Manage with Software
Replacing a letting agent with property management software like Latch can save 10% to 15% of rent while maintaining professional standards through AI-powered automation.
Save 10-15%
Remortgage
If your fixed rate has ended and you are on the SVR, remortgaging to a competitive deal can save thousands per year in interest.
Review annually
Add Value
Converting a 2-bed to a 3-bed, adding a bathroom, or upgrading the kitchen can justify a rent increase that more than covers the improvement cost over time.
Long-term strategy
Return on Investment vs Rental Yield
Rental yield measures income return only. Return on Investment (ROI) is a broader measure that includes capital growth, mortgage paydown, and tax. For a complete picture of your investment performance:
Total ROI = (Net Rental Income + Capital Growth + Mortgage Principal Repaid) / Cash Invested x 100
A property with a modest 4% net yield but 5% annual capital growth and mortgage paydown can deliver a total ROI of 15% to 20% on the cash invested, especially with leverage.
This is why many investors accept lower yields in areas with strong capital growth prospects like London and the South East. The income yield is low but the total return can be excellent over a 10 to 20 year hold.
Regional Yield Snapshot: UK 2026
| Region | Average Price | Average Monthly Rent | Gross Yield |
|---|---|---|---|
| North East | £165,000 | £700 | 5.1% |
| North West | £210,000 | £875 | 5.0% |
| Yorkshire & Humber | £200,000 | £800 | 4.8% |
| East Midlands | £235,000 | £850 | 4.3% |
| West Midlands | £240,000 | £875 | 4.4% |
| East of England | £330,000 | £1,100 | 4.0% |
| South West | £310,000 | £1,050 | 4.1% |
| South East | £385,000 | £1,250 | 3.9% |
| London | £530,000 | £1,950 | 4.4% |
| Wales | £205,000 | £750 | 4.4% |
| Scotland | £190,000 | £800 | 5.1% |
These are averages and individual properties can significantly outperform or underperform these figures. City-centre flats, HMOs, and student lets typically yield higher than family homes. Latch tracks your actual yield against these benchmarks so you can see exactly how each property in your portfolio compares.
Common Yield Calculation Mistakes
- Using asking price instead of purchase price: Your yield should be based on what you actually paid, including stamp duty and legal fees for the most accurate figure
- Ignoring void periods: Assuming 12 months of rent when the average void between tenancies is 3 to 4 weeks
- Forgetting service charges: Leasehold service charges can wipe out 1% to 2% of yield
- Not including all costs in net yield: Many investors forget insurance, compliance costs, or maintenance reserves
- Comparing gross yields across different property types: A 7% gross yield on a student HMO with 4 weeks of voids is not the same as 7% on a family home let year-round
- Ignoring tax: Your after-tax yield is what matters for personal income, and Section 24 mortgage interest restrictions mean higher-rate taxpayers keep less of their rental income
How Latch Tracks Your Rental Yield
Calculating yield manually across a portfolio is tedious and error-prone. Latch automates the entire process:
Live Yield Dashboard
See gross and net yield for every property in your portfolio updated in real time as rents are received and expenses recorded.
Always current
Expense Tracking
Every cost is automatically categorised and included in net yield calculations — from mortgage interest to a replacement light bulb.
Accurate net yield
Bank Reconciliation
Open Banking feeds pull in transactions automatically. Latch matches rental payments and expenses to the correct property without manual data entry.
Zero manual entry
Portfolio Analytics
Compare yields across properties, identify underperformers, and model the impact of rent increases or remortgaging before you commit.
AI-powered insights
Track Your Real Rental Yield with Latch
Start your free 30-day trial of Latch. AI-powered yield tracking, automated expense categorisation, and portfolio analytics that show your true returns — not just the headline figure. No credit card required.
Ready to simplify your property management?
Create your free account today and see how organized financial tracking can streamline your portfolio.
Get Started with LatchDisclaimer: This guide is for informational purposes only and does not constitute financial or investment advice. Property values, rental levels, and mortgage rates are illustrative examples based on UK market conditions in early 2026 and will vary by location and individual circumstances. Past performance is not indicative of future returns. Always conduct your own due diligence and consult a qualified financial adviser before making investment decisions. Last updated February 2026.
