Rental Yield

Rental yield helps property investors compare how much income different properties generate relative to their cost. There are two main versions.

Gross rental yield is the annual rent divided by the property’s price. For example, a flat bought for 300,000 and let for 18,000 a year has a gross yield of 6%.

Net rental yield deducts running costs, such as maintenance, insurance, management fees, service charges and periods without a tenant. If those costs total 4,500 a year, the net income is 13,500, and the net yield is 4.5%.

Net yield gives a more realistic picture of the return. Neither measure includes mortgage costs, taxes or changes in the property’s value.

Yields vary by location and property type. Properties in expensive city centres often have lower yields because prices are high relative to rents, while cheaper areas may offer higher yields with greater risk or weaker price growth. Investors usually consider rental yield alongside expected capital growth to judge a property’s total return.