Rental yield is the annual rental income from a property expressed as a percentage of its value. It's the single most important number for any buy-to-let investor, yet it's often misquoted because there are two versions — gross and net — and they tell very different stories.
Gross yield ignores all costs. It's a quick comparison tool, not a measure of profitability.
Net yield deducts all costs — this is the figure that actually tells you whether the investment makes money.
Annual costs to include:
That 6% gross yield became a 4.3% net yield — a meaningful difference when evaluating whether to invest.
As a general benchmark:
| Gross Yield | Assessment |
|---|---|
| Below 4% | Weak — difficult to cover costs and mortgage |
| 4–5% | Average — may work if capital growth is strong |
| 5–7% | Good — solid cash flow potential |
| 7–9% | Strong — typical of northern cities and HMOs |
| Above 9% | Exceptional — often student or social housing |
Most financial advisers suggest targeting at least 6–7% gross (4–5% net) for a buy-to-let to make sense after mortgage costs, especially given increased taxation since 2017.
| Region | Avg Gross Yield | Avg House Price |
|---|---|---|
| North East England | 7–9% | ~£160,000 |
| Yorkshire & Humber | 6–8% | ~£200,000 |
| North West England | 6–8% | ~£220,000 |
| Scotland | 6–8% | ~£195,000 |
| Wales | 5–7% | ~£220,000 |
| West Midlands | 5–7% | ~£240,000 |
| East of England | 4–5% | ~£335,000 |
| South East England | 3–5% | ~£380,000 |
| London | 3–4% | ~£500,000 |
Since 2017, the Section 24 changes phased out mortgage interest relief for residential landlords. The impact:
Yield measures income return. Total return includes capital appreciation. A London flat yielding 3.5% but appreciating 6% per year delivers a 9.5% total annual return. A northern terrace yielding 8% with 1% capital growth delivers 9% total. Both can be valid strategies — but your chosen strategy must match your timeline and cash flow needs.
Calculate gross and net yield, estimate mortgage ICR, and see your cash-on-cash return — all in one free tool.
Calculate Rental Yield →5% gross is average — it may work if mortgage costs are low and you benefit from capital growth. For a pure income strategy, 6–7%+ gross (4–5%+ net) is a better target, especially with current interest rates.
The most effective strategies: buy below market value, let as an HMO (room-by-room for multiple tenants), refurbish to command higher rents, switch from residential to holiday let where regulations allow, or move to a higher-yielding area.
Yes — rental income is taxable at your marginal income tax rate after allowable deductions. The £1,000 property income allowance applies to very small landlords. You must declare rental income on a Self Assessment return.
An HMO (House in Multiple Occupation) is let room-by-room to three or more unrelated tenants. Because you're collecting rent from multiple tenants instead of one household, yields are typically 8–12% — well above standard buy-to-let. The trade-off is higher management burden and licensing requirements.