Rental yield calculator
Work out the gross and net rental yield on any buy-to-let property. See a full cost breakdown and find out whether the numbers actually stack up.
The net yield is within a typical range but leaving thin margins. Worth reviewing costs to see if the numbers can be improved.
The gross yield number looks attractive but the net yield is the only one that actually matters. Most landlords find their real costs are higher than they budgeted for - voids last longer, maintenance bills arrive unexpectedly, and agent fees add up. A good rule of thumb is to budget for at least 25% of gross rental income going on costs before you even get to mortgage payments.
Gross vs net yield
Gross yield ignores all costs. Net yield accounts for everything - agent fees, voids, maintenance, insurance. Always use net yield to compare properties fairly.
The 125% rental cover rule
Many buy-to-let mortgage lenders require the monthly rent to be at least 125% of the mortgage payment. Some lenders now require 145%. Check this before applying.
Stamp duty surcharge
Buy-to-let purchases attract a 5% stamp duty surcharge on top of standard rates. This significantly increases your upfront cost and affects your overall return.
Tax on rental income
Rental income is taxable. Basic rate taxpayers pay 20% on profit, higher rate taxpayers 40%. Mortgage interest relief is now restricted to the basic rate only.
Please note: This calculator is for guidance only. Actual yields will depend on local rental markets, occupancy rates, tax position, financing costs, and other factors not captured here. Rental income is subject to income tax. Always seek independent financial and tax advice before making a buy-to-let investment decision. This is not financial advice.
Calculator results are estimates based on the information you enter and the assumptions built into the tool. They are illustrative only and should not be relied upon as accurate projections. Rates, thresholds and rules change regularly; always verify figures with an appropriate professional or official source before acting on them.
What is rental yield?
Rental yield is the annual return on a buy-to-let property investment, expressed as a percentage of the property’s value. It is the landlord’s equivalent of an interest rate — the return earned on the capital tied up in the property.
Rental yield is calculated in two ways:
Gross rental yield: Annual rent divided by property value, expressed as a percentage. If a property worth £200,000 rents for £1,000 per month, the gross yield is (£12,000 ÷ £200,000) × 100 = 6%.
Net rental yield: Annual rent minus annual costs (mortgage interest, letting agent fees, maintenance, insurance, void periods, landlord licensing) divided by property value. Net yield gives a more accurate picture of actual return.
How to use this calculator
Property value: The current market value of the property, not the purchase price (which may have been higher or lower).
Monthly rent: The current or target rental income per month.
Annual costs: Include all costs associated with running the property – mortgage interest (not repayment), letting agent fees (typically 8 to 15% of rent), maintenance and repairs (a common estimate is 1% of property value per year), landlord insurance, and an allowance for void periods (periods between tenancies when no rent is received).
Reading the result: Gross yield above 5% is generally considered a reasonable return in current market conditions; below 4% indicates the property may not generate meaningful income relative to its capital value. Net yield is more realistic – a property with 7% gross yield and high costs may net only 3 to 4%.
What counts as a good rental yield?
There is no universal standard – acceptable yield depends on the investment alternative, the local market, and the landlord’s financial position. Some landlords prioritise capital growth (property value increase) over yield, accepting low yield in high-growth areas. Others focus purely on income and target high-yield properties in areas with more modest growth expectations.
As a reference: a cash ISA currently earns 4 to 5%, a globally diversified index fund has historically returned 6 to 8% annually, and the base rate affects borrowing costs for mortgaged buy-to-let. A net yield that does not meaningfully exceed the mortgage rate on the buy-to-let means the property generates little net income from a leveraged position.
Frequently asked questions
What is a typical letting agent fee? Letting agent fees vary significantly — full management (tenant finding, rent collection, maintenance coordination) typically costs 10 to 15% of the monthly rent. Tenant-find-only (finding a tenant and managing the let-in, but leaving day-to-day management to the landlord) costs 6 to 10% of one month’s rent. Online-only agents charge less. Factor whichever service you use into the net yield calculation.
What is a void period, and how should I account for it? A void period is a period between tenancies when the property is empty and generating no rent. A common assumption for planning purposes is one month’s void per year – effectively reducing annual rental income by approximately 8%. In practice, voids vary significantly by area and property type.
How does mortgage interest affect net yield? For most landlords, buy-to-let mortgage interest is no longer fully deductible from rental income — basic rate mortgage interest tax relief replaced full deductibility in 2020. The calculation of net income from buy-to-let is now more complex and depends on your personal income tax position. Speak to a tax adviser if you are unclear on the tax treatment of your rental income.
The information on this site is for educational and informational purposes only. Nothing on Be More Peter constitutes financial advice, and nothing should be treated as such. The calculators, articles and tools on this site are designed to help you understand financial concepts and run indicative numbers - they are not a substitute for professional advice tailored to your specific circumstances. Before making any financial decision - including decisions about mortgages, pensions, investments, savings or insurance — you should seek independent financial advice from a qualified adviser who is authorised and regulated by the Financial Conduct Authority (FCA). Calculator results are estimates based on the information you enter and the assumptions built into the tool. They are illustrative only and should not be relied upon as accurate projections. Rates, thresholds and rules change regularly - always verify figures with an appropriate professional or official source before acting on them. Be More Peter is not authorised or regulated by the FCA. The content on this site does not constitute a financial promotion.
Related tools and posts
- LTV calculator — your LTV on the buy-to-let property
- Mortgage repayment calculator — your buy-to-let mortgage cost
- Rental yield explained — is your buy-to-let worth it?
- ISA calculator — compare the alternative of investing instead