Question 1

What is rental yield and how is it calculated?

Accepted Answer

Rental yield is the annual rental income expressed as a percentage of the property's purchase price. Gross yield = (monthly rent × 12) ÷ purchase price × 100. Net yield deducts ongoing costs such as management fees, maintenance, and insurance before dividing by the purchase price.

Question 2

What is a good rental yield for a buy-to-let property in the UK?

Accepted Answer

A gross yield of 6–8% or above is generally considered strong for a UK buy-to-let property. Northern cities such as Leeds, Manchester, Liverpool, and Nottingham typically offer higher yields than London or the South East. Net yield (after costs) is more important than gross yield for assessing real cash flow.

Question 3

What is the difference between gross yield and net yield?

Accepted Answer

Gross yield is calculated before any running costs are deducted — it simply divides annual rent by purchase price. Net yield deducts ongoing costs such as letting agent fees (typically 8–15%), maintenance (3–5%), buildings insurance, and void periods. Net yield is a more realistic measure of what you actually earn.

Question 4

How do I calculate monthly cash flow on a buy-to-let?

Accepted Answer

Monthly cash flow = monthly rent minus monthly mortgage payment (interest-only) minus monthly running costs. A property generating £800 pcm rent with a £450 interest-only mortgage and £120 in costs produces £230 pcm positive cash flow. Use our calculator to model your specific numbers.

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