Gross Yield
5.76%
Annual rent: £14,400
Illustrative only. Net yield and cashflow figures depend on actual costs incurred. Mortgage cost assumes interest-only repayment. Not financial advice.
What This Calculator Does
This tool works out gross and net rental yield for any UK buy-to-let property, plus the metrics lenders and investors actually check before committing capital — cash-on-cash return and ICR (interest coverage ratio) stress testing.
Start with just the purchase price and monthly rent for a quick gross yield. Toggle "Include costs" to add mortgage, letting agent fees, maintenance, buildings insurance, and service charge — that's when net yield, monthly cashflow, and the ICR stress test become meaningful.
How the Calculation Works
Gross yield = (annual rent ÷ purchase price) × 100. It's a quick screening number but ignores costs entirely.
Net yield strips out annual costs first: net yield = ((annual rent − annual costs) ÷ purchase price) × 100. Annual costs here are mortgage interest (interest-only), letting agent fees (% of rent), maintenance, buildings insurance, and ground rent / service charge.
Cash-on-cash return (shown as "Yield on Capital") divides net annual income by your actual cash deposit rather than the full purchase price — the number that matters if you're financing with a mortgage. The ICR stress test checks annual rent against annual mortgage cost at the lender's required ratio (typically 125–145% for buy-to-let); fail it and a lender won't offer the loan even if the deal looks fine on paper.
Worked Example
Take a £180,000 flat let at £950 per month, bought with a 75% LTV mortgage at 5.5% interest-only.
- Purchase price: £180,000
- Monthly rent: £950 (£11,400/year)
- Gross yield: 11,400 ÷ 180,000 × 100 = 6.3%
- Mortgage (75% LTV, 5.5% IO): £135,000 × 5.5% = £7,425/year
- Letting agent (10%): £1,140/year
- Maintenance, insurance, service charge: £1,200/year
- Total annual costs: £9,765
Net yield comes out at (11,400 − 9,765) ÷ 180,000 × 100 = 0.9% — a reminder that gross and net yield can tell very different stories once financing is factored in.
Frequently Asked Questions
What counts as a good rental yield in the UK?
As a rough guide, 5–6% gross yield is average for many UK cities, 7%+ is considered strong, and anything above 8–9% usually means a lower-value area or higher risk. Net yield after costs is typically 2–4 percentage points lower than gross.
What's the difference between gross and net yield?
Gross yield only looks at rent versus purchase price. Net yield subtracts your actual running costs — mortgage, letting agent fees, maintenance, insurance, service charge — giving a realistic picture of what you keep.
What is ICR and why do lenders check it?
ICR (Interest Coverage Ratio) measures whether rental income comfortably covers mortgage interest, usually stressed at a rate above your actual pay rate. Lenders require 125–145% ICR on buy-to-let mortgages to make sure the loan is serviceable even if rates rise or the property sits empty for a period.
Does this calculator include stamp duty or purchase costs?
No — this tool focuses on ongoing yield and cashflow. Use our Stamp Duty Calculator alongside it to see the full cost of acquisition before you calculate your real return on capital deployed.
What is cash-on-cash return and how is it different from yield?
Cash-on-cash return (labelled "Yield on Capital" here) divides your net annual income by the actual cash you put in — your deposit — rather than the full purchase price. It's the number that matters most if you're using a mortgage, since it reflects your real return on the capital you've deployed.