Buy-to-Let Yield Calculator: Gross vs Net Yield Explained (With Examples)
Rental yield is the most widely used metric in buy-to-let analysis — and the most widely misunderstood. Quoting a gross yield without accounting for costs is like quoting a salary before tax. It sounds better, but it's not what ends up in your pocket.
This guide explains the difference between gross and net yield, walks through the calculations with real examples, and tells you what yield you should actually be targeting in the current market.
What Is Rental Yield?
Rental yield expresses annual rental income as a percentage of the property's value or purchase price. It's the BTL equivalent of an interest rate on an investment — the higher the yield, the better the return on capital, all else being equal.
There are two versions:
- Gross yield — annual rent ÷ property value × 100
- Net yield — annual rent (after costs) ÷ property value × 100
Gross Yield Formula
Gross Yield = (Annual Rental Income ÷ Property Purchase Price) × 100
Example:
- Purchase price: £150,000
- Monthly rent: £850
- Annual rent: £10,200
Gross Yield = (£10,200 ÷ £150,000) × 100 = 6.8%
Gross yield is useful for quick comparisons between properties. It's the figure most commonly cited by portals, agents, and investors in conversation. But it tells you nothing about what you'll actually keep.
Net Yield Formula
Net yield strips out the costs of ownership before calculating the return:
Net Yield = ((Annual Rental Income − Annual Costs) ÷ Property Purchase Price) × 100
Typical annual costs to deduct:
| Cost | Typical Range |
|---|---|
| Letting agent fees | 8–15% of rent |
| Maintenance and repairs | 1–1.5% of property value |
| Landlord insurance | £150–£400/year |
| Void periods (allowance) | 4–8% of rent |
| Mortgage interest | Depends on LTV and rate |
| Ground rent / service charge | Leasehold only |
| Accountancy | £300–£600/year |
Example (same property, adding costs):
- Annual rent: £10,200
- Letting agent (12%): −£1,224
- Maintenance allowance (1%): −£1,500
- Insurance: −£250
- Void allowance (5%): −£510
- Total costs (excl. mortgage): −£3,484
- Net income: £6,716
Net Yield = (£6,716 ÷ £150,000) × 100 = 4.5%
The same property drops from 6.8% gross to 4.5% net once realistic costs are applied. This is before mortgage interest — which, for a 75% LTV mortgage at 5%, would cost approximately £5,625/year, leaving very little cashflow.
Return on Investment (ROI) vs Yield
Yield measures return relative to the total property value. ROI measures return relative to your actual cash invested (deposit + costs).
For leveraged investments, ROI is often a more useful metric:
ROI = (Annual Net Income ÷ Total Cash Invested) × 100
Example:
- Property: £150,000
- 25% deposit: £37,500
- Stamp duty (additional property rate): £6,000
- Legal and survey fees: £2,500
- Total cash invested: £46,000
- Annual net income (after mortgage and all costs): £1,500
ROI = (£1,500 ÷ £46,000) × 100 = 3.3%
This is a modest ROI, but doesn't capture capital growth — which over 10+ years may be the dominant driver of total return.
What Is a Good Rental Yield in 2026?
"Good" depends entirely on your investment strategy and the current rate environment.
At today's mortgage rates (5–5.5% for typical BTL products):
- Below 5% gross yield: Likely cashflow negative on most leveraged setups. Only justifiable if the capital growth thesis is very strong.
- 5–7% gross yield: Breakeven to mildly positive cashflow. Viable if you have a longer-term view.
- 7%+ gross yield: Positive cashflow in most scenarios. The return profile improves significantly as rates fall.
As a general rule: Target a net yield of at least 1.5–2% above your mortgage interest rate to build in sufficient margin for voids, maintenance surprises, and rate changes.
Yield by Property Type
Different property types produce very different yield profiles:
| Type | Typical Gross Yield | Notes |
|---|---|---|
| Terraced house | 5–8% | Best yield-to-management ratio |
| Semi-detached house | 5–7% | Broad demand, lower management |
| City centre flat | 4–6% | Service charges compress net yield |
| HMO (3–6 beds) | 8–14% gross | Highest yield, highest management burden |
| Studio / 1-bed flat | 5–7% | Strong demand, lower capital values |
| New build flat | 3.5–5% | Premium purchase price compresses yield |
HMOs offer the highest gross yields but require licensing, more intensive management, and higher capex to maintain standards. They're not passive income.
The Yield Illusion: Common Mistakes
1. Using asking rent instead of achieved rent Rightmove asking rents are typically 5–10% above what properties actually let for. Use achieved data from local agents for accurate calculations.
2. Ignoring service charges on leasehold properties A flat with a £2,400/year service charge on a £130,000 property effectively reduces your yield by ~1.8% before anything else. Always request the last 3 years of service charge accounts.
3. Omitting void allowances Even in tight rental markets, sensible investors budget for 2–4 weeks of void per year. Two consecutive void weeks in a year of 52 weeks erases 3.8% of your rental income.
4. Not accounting for Section 24 The restriction of mortgage interest relief (Section 24) means that higher-rate taxpayers can no longer deduct mortgage interest from rental income before calculating tax. This substantially affects after-tax returns for leveraged investors. A limited company structure may be more efficient — take specialist advice.
Calculating Yield Quickly on Live Listings
When screening properties on Rightmove, you need a quick mental model for yield estimation:
- Monthly rent × 120 = rough annual gross income as a percentage multiplier
- If the property is listed at £X, divide annual rent by £X and multiply by 100
Or use the shortcut: Monthly rent ÷ Property price × 1,200
Example: £750/month ÷ £130,000 × 1,200 = 6.9% gross yield
BTLDeals.com does this calculation automatically for every active Rightmove listing in your target area, factoring in estimated rental income, price history, and time on market — so you see pre-scored opportunities rather than doing the maths on 50 listings manually.
Quick Reference: Yield Decision Framework
Gross yield > 7%?
├── Yes → Check net yield, management burden, and tenant demand
│ → Strong BTL candidate
└── No → Is there a capital growth case?
├── Strong capital growth thesis → Viable long-term hold
└── No clear capital growth → Borderline / pass
Summary
Rental yield is the starting point for BTL analysis, not the end point. Gross yield tells you whether a property is worth investigating; net yield tells you whether it's worth buying; ROI tells you how hard your money is working. Use all three together.
In 2026's rate environment, focus on properties where the net yield after all costs (including mortgage) generates positive monthly cashflow — even if that margin is slim. Cashflow protects you through rate rises, void periods, and unexpected costs.
BTLDeals.com automatically calculates estimated gross yield for every property it monitors, scoring and ranking deals so you can focus your time on the opportunities most likely to stack up. View today's deals.