Whether you call it working out rental yield or calculating rental yield, the goal is the same: a single percentage that tells you how much a property earns in rent relative to its value. This page walks through both the gross and net rental yield formulas, with worked examples, so you can work it out by hand or just sanity-check what a calculator gives you.
Want a tool that will work out rental yield for you? Try our rental yield calculator, it's free, fast, and hopefully fun!
Rental yield is a property's annual rental income expressed as a percentage of its value. It's the standard way investors, lenders, and letting agents compare the income potential of different properties, regardless of price. A £1m flat and a £100k terrace can be compared directly once you work out their yields.
There are two main types of rental yield:
Both start from the same two numbers, so work these out first:
To work out gross rental yield, divide the annual rental income by the property value and multiply by 100:
Gross Rental Yield = (Annual Rental Income / Property Value) x 100For example, if the annual rental income is £18,000 and the property value is £300,000, the gross rental yield is 6%.
Net rental yield accounts for running costs, so it needs one more step: sum up the annual expenses first. These typically include:
... but there will almost certainly be other expenses not mentioned here!
Then subtract the annual costs from the annual rental income, divide the difference by the property value, and multiply by 100:
Net Rental Yield = ((Annual Rental Income - Annual Expenses) / Property Value) x 100
Here's how gross rental yield works out across a range of property prices and
monthly rents, using (Monthly Rent × 12 ÷ Property Value)
× 100:
| Property value | Monthly rent | Annual rental income | Gross rental yield |
|---|---|---|---|
| £150,000 | £750 | £9,000 | 6.0% |
| £250,000 | £1,100 | £13,200 | 5.3% |
| £400,000 | £1,600 | £19,200 | 4.8% |
| £600,000 | £2,200 | £26,400 | 4.4% |
Now all of that is rather a lot to remember, which is why we created a tool that calculates rental yield for you — just enter a price and rent to work out both gross and net yield instantly.
Divide the annual rental income by the property's value, then multiply by 100 to get a percentage. For example, £18,000 annual rent on a £300,000 property works out at 6%. This gives you the gross yield; subtract annual expenses from the rent first to work out net yield.
The gross rental yield formula is (Annual Rental Income / Property Value) x 100. The net rental yield formula is ((Annual Rental Income - Annual Expenses) / Property Value) x 100.
A rental yield of 5-8% is generally considered good, 8-12% is very good, and anything above 12% is excellent. What counts as strong varies by area, so it's worth comparing against similar properties nearby.
No. Rental yield measures annual rental income against the property's value, while ROI (return on investment) typically measures total return - including capital growth and financing costs - against the cash you've actually invested. A property can have a modest yield but a strong ROI if it's appreciating quickly, or vice versa.