Rental yield calculator
Agents quote gross yield on the asking price. What you earn is net yield on everything you spent. This shows all three side by side.
How this is calculated
Gross yield on price is a year of rent divided by the purchase price. It is the quickest figure to work out and the one listings use.
Gross yield on total invested divides the same rent by the price plus buying costs and initial works, which is what you actually spent.
Net yield takes off the void allowance, then the agent fee on the rent collected and the yearly running costs, and divides what is left by the total invested. Mortgage costs and tax are excluded so the figure describes the property rather than how it is financed.
Worked example
A £180,000 house with £12,000 of buying costs, let at £950 a month, is a 6.3% gross yield on the price. Allow 8% for voids, a 10% agent fee and £1,480 of running costs and the net income is £7,959, a 4.1% net yield on the £192,000 invested.
Common questions
What is a good rental yield?
It depends on the area and on what you want from the property. Lower yields in high value areas often come with stronger price growth, higher yields elsewhere with more management and maintenance. Compare net yields on the same basis rather than a headline figure.
Should I include the mortgage?
Not in the yield. Use the buy to let investment calculator for cash flow and return on your cash once the mortgage is included.
Buy to let investment calculator
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Work back from the done-up value to the most you can pay and still get your money out.