Rental Yield Calculator: Gross Yield, Net Yield & Cash-on-Cash ROI
The three yield numbers that actually matter for UK buy-to-let: gross yield, net yield after real running costs, and cash-on-cash ROI including mortgage leverage.
The three yield numbers explained
Gross yield
Annual rent ÷ Property price × 100
The number every estate agent quotes. It ignores every cost. It's a useful comparison metric when scanning listings quickly, but nothing to base an actual decision on. A headline 8% gross yield can shrink to 4% net once real costs are included, and go negative once mortgage interest is counted.
Net yield
(Annual rent − running costs) ÷ Property price × 100
The pre-tax, pre-mortgage return on the whole property price as capital employed. Net yield is what you'd earn if you bought the property outright with no borrowing. Below 4% net is a red flag — you might be better off in a savings account with none of the headaches.
Cash-on-cash ROI
Pre-tax cash flow ÷ Actual cash invested × 100
The return on the money that actually left your bank account — deposit plus SDLT, legal fees, survey, and any refurb. This is where leverage shows up: a 4% net yield property bought with 25% deposit can produce a 10%+ cash-on-cash return in a low-rate environment, because you're earning the net yield on the whole property using only your 25% capital. It also works in reverse — at 6% mortgage rates, the same property might be cash-flow negative.
Worked example
£200,000 flat, £1,100/month rent, 25% deposit (£50,000) + £9,000 purchase costs = £59,000 cash in. Gross yield: £13,200 ÷ £200,000 = 6.6%. After 2 weeks void, 10% management, 10% maintenance provision, £180 insurance, £400 other = £3,684 of costs, so net operating income = £8,984, net yield = 4.5%. Mortgage on £150k at 5.5% interest-only = £8,250/year. Pre-tax cash flow = £8,984 − £8,250 = £734/year. Cash-on-cash = £734 ÷ £59,000 = 1.2%. You could put the £59k in a 4.5% savings account and earn £2,655/year with zero effort — so on paper this deal only makes sense if you're betting hard on capital growth.
Frequently asked questions
What's the difference between gross and net rental yield?
Gross yield is the crude annual rent as a percentage of the property price — useful for quick comparisons but misleading. Net yield subtracts real running costs (management fees, insurance, maintenance provision, void periods, service charges) to give the actual pre-tax return on your capital. Serious BTL investors quote net yield; brochures quote gross.
What is cash-on-cash return?
Cash-on-cash return measures the return on the actual cash you put in — not the whole property price. If you buy a £200k property with a 25% deposit (£50k cash + fees), and net profit after mortgage payments is £3,000/year, cash-on-cash return is £3k / £52k = 5.8%. This is a much better measure for leveraged BTL because it accounts for how a mortgage amplifies returns.
What net yield should I aim for?
As of 2024, most seasoned UK BTL investors won't seriously consider a property below 6% gross yield / 4% net yield. Below that, Section 24 tax treatment plus rising interest rates makes leveraged BTL genuinely loss-making at higher-rate tax bands. Cheaper regions (North East, Wales, Scotland) still hit 8–10% gross routinely; London usually offers 3–4% gross and relies entirely on capital growth to work.
What running costs should I include?
The realistic list: letting agent (10–15% of rent if fully managed), landlord insurance (~£150/year), gas safety cert (£80), electrical cert (EICR every 5 years, £150), boiler service (£100), general maintenance provision (10% of rent is a safe rule), void periods (2 weeks a year = ~4%), ground rent and service charge if leasehold. Missing any of these leads to overestimating yield by 2–3 percentage points.
Does this account for Section 24 tax?
Not directly — the yield numbers are pre-tax. Use our Landlord Tax calculator for the Section 24 treatment (mortgage interest not deductible for personal ownership, replaced with 20% tax credit). The combination of Section 24 tax and a 6% mortgage means the actual after-tax cash flow on a highly-leveraged BTL held personally can be zero or negative even at reasonable yields.
What's a reasonable value to assume for maintenance?
The industry rule of thumb is 10% of annual rent for ongoing maintenance provision — this covers small repairs, tenant turnover redecoration, appliance replacement. For older properties or listed buildings, use 15%. This is a provision, not a bill you actually pay every year, but you must plan for it.
Yield calculations are pre-tax and exclude capital growth. Property investment carries risk — values can fall as well as rise. Not investment advice.
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