Rental Yield Calculator

Three yields, one calculator. Gross yield is the marketing number; net yield is the truth; cash-on-cash return is what actually matters if you're using a mortgage.

The three yield numbers — why they all matter

1. Gross yield

Annual rent ÷ property price. The number every estate agent and portal will quote, because it's always the highest. It's useful for comparing properties at a glance and for the “1% rule” screen (monthly rent ≥ 1% of price), but it ignores every cost. Treat it as a filter, not an answer.

Gross yield = (Monthly rent × 12) ÷ Property price × 100

2. Net yield

The same calculation after subtracting all the costs of actually running the property: voids, letting agent, maintenance, insurance, service charge, other costs. This is the “return on the asset” figure — what the property earns regardless of how it was financed. Net yield is typically 1.5-3 percentage points below gross yield.

Net yield = (Annual rent − Annual costs) ÷ Property price × 100

3. Cash-on-cash return

Net cashflow ÷ cash you actually invested. If you bought with a mortgage, your “cash invested” is the deposit, stamp duty, legal fees, and any refurb. This number can be much higher than the net yield because borrowing amplifies returns — but it can also turn negative if the mortgage interest exceeds your net operating income. It's the right number to compare against alternative investments (stocks, savings).

Cash-on-cash = Net annual cashflow ÷ Total cash invested × 100

Worked example

A £250,000 buy-to-let in a UK provincial city, rented for £1,400/month. Mortgage of £180,000 at 5.5% (interest-only). Cash invested: £80,000 (deposit, fees, light refurb).

• Gross rent: £16,800/year. Gross yield: 6.7%.
• 5% vacancy = £840 lost. Letting agent at 10% = £1,596. Maintenance reserve at 1% of value = £2,500. Insurance £350 + other £200 = £550. Total operating costs: £5,486 (33% of gross rent).
• Net operating income: £16,800 − £5,486 = £11,314. Net yield = 4.5%.
• Mortgage interest at 5.5% × £180,000 = £9,900. Net cashflow: £11,314 − £9,900 = £1,414/year, or £118/month.
• Cash-on-cash: £1,414 ÷ £80,000 = 1.8%.

Notice the headline 6.7% gross yield collapses to 1.8% cash-on-cash once everything is included. And that 1.8% return is before tax, capital gains volatility, and the time you'll spend dealing with tenants and contractors. Property investing is not the goldmine the headline numbers suggest — at least not in the current rate environment.

UK / Gibraltar yield benchmarks

Approximate gross yields by region in 2025:

• London zone 1-2: 3-4% gross. Capital growth play, weak income.
• South-East commuter belt: 4-5% gross.
• UK provincial cities (Manchester, Leeds, Liverpool): 6-8% gross.
• Student lets in university cities: 7-10% gross, but higher voids and management hassle.
• Gibraltar (residential): 4-5% gross typical. Limited supply, sticky tenants, low voids.
• Costa del Sol holiday lets: highly variable — 5-8% gross is possible but vacancy can hit 50% off-peak.

Rules of thumb: net yield under 4% means you're betting on capital growth, not income. 5-6% net is solid in current conditions. 8%+ net usually means a property with significant management overhead, higher tenant turnover, or condition risk — not a free lunch.

The costs people forget

• Voids. 5% is optimistic; 8-10% is realistic for first-time landlords. Two weeks between tenants is already 4% of the year.
• Maintenance. 1% of property value is the textbook reserve; older houses often need 1.5-2%. A boiler replacement is £3-5k; a roof, £8-15k.
• Gas safety + EICR + EPC. Annual gas check (~£100), 5-yearly electrical (£200-300), EPC every 10 years (£60-100).
• Tenant turnover. Re-letting fees, advertising void, inventory check — easily £500-1,000 per turnover.
• Tax on rental income. UK basic rate landlords pay 20% on net profit; higher-rate pays 40%. Mortgage interest is no longer fully deductible — replaced by a 20% tax credit. Companies (Ltd) work differently.
• Capital gains tax when you sell, currently up to 24% on residential property gains above the annual exempt amount in the UK.
• Mortgage product fees, typically £999-£2,000 every 2-5 years on refixes.

The 1% rule (US) vs the 5% / 7% rule (UK)

US investors talk about the “1% rule”: monthly rent should be at least 1% of the purchase price (i.e., 12% gross yield). It's almost impossible to find in any UK city. The UK equivalent practitioners use: net yield of 5-7% as the threshold for a viable buy-to-let. Below 5% net you're effectively speculating on capital growth; above 7% net there's usually a reason the property is cheap that you haven't found yet.

What this calculator does NOT model

• Tax on rental income (varies by income, country, ownership structure)
• Capital gains tax on eventual sale
• Stamp duty / property purchase tax (huge for UK BTL — extra 3-5% surcharge)
• Mortgage principal repayment (we model interest-only; repayment mortgages have higher monthly cost but build equity)
• Refinancing fees every 2-5 years
• Capital growth or property depreciation
• Inflation effects on rent vs costs (rent often lags both)
• Section 24 / corporate structure differences (UK landlords)

Disclaimer

Educational only. Property investing has substantial regulatory, tax, and liquidity complexity that varies by country and ownership structure. Consult a qualified tax advisor and mortgage broker before purchasing a rental property.