# Rental yield calculator

rental income

## Net annual rental yield: 0% Enter expenses in the categories below to calculate net yield

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2024-05-06: You can now choose a rental income period from weekly, monthly or annual.

2024-02-22: Our Chrome extension for calculating gross rental yield now supports OnTheMarket.com properties.

2024-02-20: The Rental Yield Calculator Chrome extension now supports Rightmove.co.uk properties.

2023-09-16: You can now calculate gross rental yield while viewing any web page using our Chrome extension! When viewing a Zoopla.co.uk property it will automatically use the property's price.

## How can I calculate rental yield?

Use our calculator to work out your rental return. It works out gross and net annual rental yield as you type. There are three easy steps to follow:

• Input the property's purchase price or current market value;
• Enter the monthly rent you charge for the property;
• If available, provide the property's annual operating costs for a more accurate net yield calculation.

The calculator will automatically display the annual rental yield. It's important to keep in mind that while the tool provides a reliable approximation, actual rental yields can vary based on real market conditions.

## What is rental yield?

Rental yield is a crucial metric used by property investors, lenders, and letting agents to assess the potential return on investment from a rental property. It provides a standardized way to compare different properties and investment opportunities.

There are two main types of rental yield:

• Gross yield: The total annual rent divided by the property value, before any expenses are deducted.
• Net yield: The annual rent minus expenses, divided by the property value, giving a more accurate picture of actual returns.

The basic formula for calculating annual rental yield is:

Annual Rental Yield = (Annual Rental Income / Property Value) x 100

## How can I calculate rental yield?

Use our calculator to work out your rental return. It calculates both gross and net annual rental yield as you type. Follow these steps:

1. Enter the property's purchase price or current market value.
2. Input the rental income (you can choose daily, weekly, monthly, or annual).
3. For net yield, provide the property's operating costs in the categories below.

The calculator will automatically display both the gross and net annual rental yield. Remember that while this tool provides a reliable approximation, actual rental yields can vary based on real market conditions.

## What's considered a good rental yield?

What constitutes a "good" rental yield can vary depending on location, property type, and market conditions. Generally:

• 5-8% is considered a good rental yield
• 8-12% is considered very good
• 12%+ is considered excellent

However, always consider other factors such as potential for capital growth, local market trends, and your investment goals when evaluating a property.

## Factors affecting rental yield

Several factors can impact rental yield, including:

• Location (city vs. rural, proximity to amenities)
• Property type (house, apartment, HMO)
• Property condition and age
• Local rental demand
• Seasonal fluctuations (for holiday rentals)
• Changes in local property values
• Government regulations and taxes

## Why rental yield? Why not rental return?

While often used interchangeably, rental yield and rental return are distinct metrics:

• Yield is the ongoing income from an investment, expressed as a percentage of the property's value. It's forward-looking and helps compare different properties.

• Return typically refers to the total gain or loss on an investment over time, including both rental income and capital appreciation. It's backward-looking and gives a holistic view of the investment's performance.

For example, a property might have a high rental yield but low capital growth, or vice versa. Considering both metrics gives a more complete picture of an investment's performance.

## Limitations of rental yield

While rental yield is a valuable metric, it shouldn't be the sole factor in property investment decisions. Consider these limitations:

• It doesn't account for potential capital growth
• It may not reflect short-term market fluctuations
• It doesn't consider the quality of tenants or ease of property management
• Higher yields might come with higher risks or in less desirable areas

Always consider rental yield alongside other factors and seek professional advice for comprehensive investment decisions.

### Should I use purchase price or current value when calculating rental yield?

It depends on your goal. Using the purchase price gives you a historical perspective on your investment's performance. Using the current market value provides a more up-to-date view of the property's performance relative to the current market.

### How often should I recalculate rental yield?

It's a good practice to recalculate rental yield annually or whenever there are significant changes in rental income or property value. Regular recalculation helps you stay informed about your investment's performance.

### Why is my net yield much lower than my gross yield?

Net yield is always lower than gross yield because it accounts for expenses. If the difference is very large, it might indicate high operating costs, which could be an area to investigate for potential savings.

Ready to calculate your rental yield? Use our calculator above to get started. Remember, while this tool provides valuable insights, it's always advisable to consult with a financial advisor or property professional for personalized investment advice.

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