Rental yield tells you how much income a property produces relative to its value. It is one of the first numbers to look at, and one of the easiest to misread.
Gross yield
Gross yield is annual rent divided by the property's value, shown as a percentage.
Gross yield = annual rent ÷ property value × 100
A property worth £200,000 earning £12,000 a year in rent has a gross yield of 6%.
Net yield
Net yield subtracts the costs of owning and running the property.
Net yield = (annual rent − annual costs) ÷ property value × 100
Costs typically include letting and management fees, maintenance and repairs, insurance, service charges and ground rent, safety certificates, void periods and any interest on borrowing. If those total £3,000 a year in the example above, net yield falls to 4.5%.
Why net yield matters
Investors in a fractional property company receive what is left after costs. Always ask for the net figure and the assumptions behind it.
Yield is only half the story
High yields are often found in places with lower capital growth or higher risk. A balanced view looks at income, growth prospects, tenant demand and building condition together. Try different assumptions in our calculator.
This guide is general information, not financial, tax or legal advice. If you are unsure whether an investment is right for you, speak to a regulated financial adviser.