UK property guide
What is a good rental yield?
Gross yield is a quick comparison, not a verdict. Work from rent to running costs, financing and tax, then compare the result with the cash committed and the risks of that property.
Gross yield
Annual rent divided by purchase price or current value.
Net yield
Deduct operating costs before comparing properties.
Cash flow
Include mortgage payments to see the monthly movement.
Cash return
Compare yearly cash flow with the cash actually invested.
Gross yield is the first filter
Gross yield is annual rent divided by the property price, multiplied by 100. A £250,000 property let for £1,200 a month produces £14,400 of annual rent and a gross yield of about 5.8%.
It is useful for scanning similar properties quickly, but it ignores every cost and does not show whether the rent covers the mortgage.
Net yield makes the comparison more realistic
Deduct operating costs such as management, maintenance, insurance, service charges, licensing and an allowance for void periods before dividing by the property price. State the definition whenever you compare figures, because some sources include different costs under “net yield”.
There is no single good UK yield
A useful benchmark is the return available from comparable properties in the same local market, using the same cost assumptions and property type. A higher headline yield can reflect lower expected growth, more management, greater void risk, expensive maintenance or a tenant market that is harder to serve.
Set a minimum that covers the actual operating costs, financing and a margin for uncertainty. Rejecting a property because it misses that requirement is more useful than chasing a national average.
Cash flow answers a different question
Monthly cash flow is rent received minus operating costs and the mortgage payment. On a repayment mortgage, part of that payment reduces the capital balance, so negative or thin cash flow is not identical to an economic loss. It still shows how much cash the property adds to or takes from the household each month.
Cash-on-cash return divides yearly pre-tax cash flow by the cash invested, including the deposit and buying costs. It helps compare financing structures, but it should sit beside maintenance risk, liquidity and possible capital gains or losses.
Tax can change the result
For individual residential landlords, mortgage finance costs are not deducted from rental income in the old way. HMRC instead applies a basic-rate tax reduction, subject to its calculation rules. This can affect higher-rate taxpayers significantly. Companies and other ownership structures follow different rules.
| Measure | Includes | Use it for |
|---|---|---|
| Gross yield | Rent and property price | Fast local comparison |
| Net yield | Rent, price and operating costs | Property-level operating return |
| Monthly cash flow | Operating costs and mortgage payment | Household cash requirement |
| Cash-on-cash return | Cash flow and cash invested | Comparing financing choices |
This is general planning information, not investment or tax advice. Use property-specific quotes and advice before committing money.
Run the property numbers
The free calculator separates gross yield, net yield, mortgage cash flow and cash-on-cash return.
Rental-yield questions
What percentage counts as good?
There is no reliable UK-wide answer. Compare the local market, then test the actual costs, financing, tax and risks.
Should the mortgage be included in net yield?
Definitions vary. Keeping financing separate makes property comparisons clearer, then cash flow can show the effect of the chosen mortgage.
Does a higher yield mean a better investment?
No. It can come with higher operating risk, lower expected growth or more management. Yield is one part of the decision.