Question 1

What is gross rental yield?

Accepted Answer

Gross rental yield is the annual rent divided by the property price, expressed as a percentage. For example, a property bought for 200,000 GBP let at 12,000 GBP a year has a gross yield of 6%. It is a headline figure only and ignores running costs, voids and tax.

Question 2

What is net rental yield?

Accepted Answer

Net yield is annual rent minus running costs, divided by the property price (or by total cash in, depending on convention). Costs to subtract include mortgage interest, letting agent fees, maintenance, voids, insurance, ground rent or service charge for flats, and accountancy. Net yield is the figure that actually matters for portfolio decisions.

Question 3

What is cash on cash return?

Accepted Answer

Cash on cash return is the annual cash flow after all costs and mortgage payments, divided by the total cash you put into the deal (deposit, stamp duty, legal fees, refurb). It tells you the real return on the money you actually invested, which is more meaningful than yield on the property price when you are using a mortgage.

Question 4

What is a typical gross yield in the UK?

Accepted Answer

Most UK regions deliver gross yields between 3% and 6%. London and the South East tend to sit at the lower end (often 3% to 4%), while parts of the North of England, Wales and Northern Ireland can reach 7% to 10% on the right stock. HMOs and serviced accommodation can push higher but with more work and risk.

Question 5

Which costs should I include when working out net yield?

Accepted Answer

At minimum include: mortgage interest, letting agent management (typically 10% to 15% plus VAT), maintenance and repairs (a sensible reserve is around 1% of property value per year), voids (budget one month a year as a rule of thumb), buildings insurance, ground rent and service charge if it is a flat, accountancy fees, and any regulatory costs such as selective licensing, gas safety, EICR and EPC works.

Question 6

Capital growth or rental yield, which matters more?

Accepted Answer

Both matter but they behave differently. Yield gives you cash flow today and pays the bills. Capital growth builds wealth over the long term and is largely tax-deferred until you sell. A balanced portfolio often pairs higher-yielding stock in the North with growth-leaning stock in the South. Yield protects you during downturns; growth rewards patience.

Question 7

How does leverage from a mortgage affect my return?

Accepted Answer

A mortgage amplifies your return on cash invested. If a property grows 5% in value, that is 5% on the whole asset, but if your deposit is only 25% of the price, the equivalent growth on your cash is much larger. The same effect works against you in a falling market, and interest costs erode net yield, so leverage rewards careful stress testing.

Question 8

What hidden costs catch new landlords out?

Accepted Answer

The big ones are the 3% SDLT surcharge on additional properties, legal and survey fees, lender arrangement fees, initial refurb to make a property lettable, EPC C upgrade works as MEES regulations tighten, and the running cost of compliance (gas, electrics, smoke alarms, deposit protection). Budget at least 5% of the purchase price for total acquisition costs on top of stamp duty.

Question 9

How does HMO yield compare with a single let?

Accepted Answer

An HMO (House in Multiple Occupation) typically delivers a gross yield around 1.5 to 2 times higher than a single let on the same property, because you are renting by the room. The trade-off is higher management costs, more wear and tear, planning and licensing requirements, and tougher mortgage criteria. Net yield uplift is usually meaningful but not as dramatic as the gross figure suggests.

Question 10

How does tax band and ownership structure (personal vs Ltd) change net yield?

Accepted Answer

Since the Section 24 changes, personal landlords cannot deduct mortgage interest as a cost; they get a 20% tax credit on it instead. Higher-rate and additional-rate taxpayers therefore see a much lower net yield than headline numbers suggest, while basic-rate taxpayers are largely unaffected. A limited company (SPV) can fully deduct mortgage interest before corporation tax, so the Section 24 problem does not bite and retained profits compound faster. Trade-offs include slightly higher mortgage rates, accountancy costs and tax on extracting profit as dividends or salary.

Question 11

What net yield should serious portfolio investors target?

Accepted Answer

Most professional landlords aim for a net yield of 6% or more on cash invested. Below that, a portfolio struggles to absorb voids, rate rises and refurb cycles. Cash on cash return is usually a better benchmark than yield on price, because it reflects what your actual money is doing and lets you compare against other investments.

Question 12

How can I improve the yield on an existing property?

Accepted Answer

The main levers are: raise the rent to market level at renewal, refurbish to justify a higher rent and reduce voids, change use (for example to HMO or serviced accommodation where permitted), refinance to a lower-rate product when the fixed term ends, and review running costs (cheaper insurance, switch agents, or self-manage). To sanity-check any plan, work out the monthly break-even rent (annual mortgage interest plus all running costs, divided by 12) and make sure your target rent comfortably beats it.

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Property ROI Calculator 2025

Calculate Your ROI

Property Investment Details

Annual Income & Expenses

Capital Appreciation (Optional)

Important Notes

Frequently Asked Questions

What is a good ROI for property investment?

How is cash-on-cash return different from total ROI?

Should I include capital appreciation in ROI calculations?

Why is ROI calculated on my cash investment, not the property value?

Ready to invest in property?

Seen a property investment you like? Message us on WhatsApp

Frequently Asked Questions

What is gross rental yield?

What is net rental yield?

What is cash on cash return?

What is a typical gross yield in the UK?

Which costs should I include when working out net yield?

Capital growth or rental yield, which matters more?

How does leverage from a mortgage affect my return?

What hidden costs catch new landlords out?

How does HMO yield compare with a single let?

How does tax band and ownership structure (personal vs Ltd) change net yield?

What net yield should serious portfolio investors target?

How can I improve the yield on an existing property?

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Rental Income Calculator

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