Rental Yield Calculator

Rental yield is the single most-quoted number in buy-to-let investing, but it is often quoted without enough context to be genuinely useful. Our rental yield calculator works out both gross and net yield, plus your realistic monthly cash flow after mortgage payments and running costs — the numbers that actually determine whether a property is a good investment.

Gross Yield: A Starting Point, Not the Full Picture

Gross yield is simply annual rent divided by property price, expressed as a percentage. It is quick to calculate and useful for comparing properties at a glance, which is exactly why it gets quoted so widely — but it completely ignores costs, void periods, mortgage interest and tax, all of which can turn a property with an impressive-looking gross yield into a much less attractive investment once the full picture is considered.

Net Yield: A More Honest Number

Net yield deducts your realistic annual running costs — letting agent fees, maintenance, insurance, ground rent and service charges where applicable, and an allowance for void periods — before dividing by the property price. This gives a far more honest picture of the underlying return the property generates, before even considering how it is financed. Comparing net yields across potential properties, rather than gross yields, is a much better way of judging genuine investment quality.

Cash Flow: What Actually Lands in Your Bank Account

If you are financing the purchase with a mortgage (typically interest-only for buy-to-let), your monthly cash flow is what remains after subtracting both running costs and the mortgage payment from the rent received. This is the figure that determines whether the property is self-sustaining month to month, or whether you would need to top it up from other income — an important distinction that yield percentages alone do not reveal.

Cash-on-Cash Return: The Investor’s Real Metric

Because most buy-to-let purchases are leveraged with a mortgage, the return on your actual cash invested (deposit plus purchase costs) is often far more meaningful than the yield on the full property price. A property with a modest 5% net yield but heavily geared with a mortgage can produce a much higher cash-on-cash return on the deposit actually invested — though this cuts both ways, since leverage amplifies losses as well as gains if rents fall or void periods extend.

A Worked Example

A £180,000 property let at £950 a month generates £11,400 annual rent — a 6.3% gross yield. Deduct running costs of around 20% of rent (£2,280) and net yield falls to roughly 5.1%. With a £45,000 deposit, £135,000 mortgage at an interest-only monthly payment of around £610, and purchase costs of £5,000, monthly cash flow comes to around £150, or £1,800 a year — a cash-on-cash return of about 3.6% on the £50,000 total cash invested, before accounting for any tax due on the rental profit.

Void Periods: The Cost Many Investors Underestimate

A void period — the time a property sits empty between tenancies — is one of the most commonly underestimated costs in buy-to-let. Even a well-managed property is unlikely to be occupied 100% of the time, and every week vacant is a week of rent lost while costs like the mortgage, insurance and any service charges continue regardless. Building a realistic void allowance into your running costs assumption, rather than assuming continuous occupancy, gives a far more reliable long-run yield figure. Areas with strong, consistent tenant demand tend to see shorter void periods than areas with an oversupply of rental stock, which is worth researching specifically for any location you are considering, rather than relying on yield figures alone.

Frequently Asked Questions