Definition

What is rental yield?

Rental yield shows the annual rental income generated by a property as a percentage of its purchase price or current market value. It is commonly used by landlords and property investors to compare the potential income returns of different buy-to-let properties.

This calculator uses the figures entered to estimate gross and net rental yield. It is intended as a comparison tool rather than a substitute for a professional rental valuation or financial advice.

Calculation

Gross and net rental yield

Gross rental yield measures annual rent before any costs are deducted. In this calculator, it is calculated by dividing annual rental income by the property’s purchase price and multiplying the result by 100. This is the figure most commonly quoted when investment properties are advertised.

Net rental yield provides a more detailed estimate by deducting the monthly and annual running costs entered above, then comparing the remaining annual rental income with the purchase price and one-time purchase costs. Running costs may include letting and management fees, insurance, maintenance, service charges, ground rent and anticipated periods when the property may be vacant.

Because these expenses can significantly affect the income produced by a property, net yield will normally be lower than gross yield and may provide a more realistic basis for comparing potential investments.

Performance

What is a good rental yield?

There is no single rental yield percentage that is suitable for every property. A good yield will depend on the location, property type, purchase price, expected rent, financing costs, condition and the time, cost and management involved. Your investment objectives and attitude to risk will also be important.

A higher yield may indicate stronger potential rental income, but it can also be associated with greater maintenance, management or letting risks. A lower-yielding property may still appeal where there is reliable tenant demand, lower anticipated costs or potential for long-term capital growth.

Student properties and houses in multiple occupation can sometimes produce higher gross yields than conventional single-household rentals. However, they may also involve additional management, utility, licensing, maintenance and compliance costs. Properties should therefore be compared using realistic net figures rather than gross yield alone.

Local market

Rental yields in Loughborough

Rental yields in Loughborough vary considerably between neighbourhoods and property types. Proximity to Loughborough University, access to the town centre, local employment, transport links, property condition and tenant demand can all influence both rental value and purchase price.

Results can also differ significantly between professional homes and houses in multiple occupation.

Before purchasing a buy-to-let property in Loughborough, landlords should obtain an accurate rental valuation and allow for likely running costs, periods without rent and any necessary improvement or compliance work.