Enter a price and the rent.
Gross yield and net yield
Gross yield is the annual rent divided by the price: £1,650 a month on a £300,000 property is £19,800 a year, a gross yield of 6.6%. Net yield takes off the running costs first, letting and management, void periods, insurance, repairs, service charge and ground rent, so it shows what the property actually earns. Comparing deals on net yield stops a high-rent, high-cost property looking better than it is.
Cash flow and cash-on-cash return
Once a mortgage is in place, the useful figures are the monthly cash flow after interest and the cash-on-cash return: the annual cash flow divided by the cash the investor actually put in (deposit, stamp duty, fees and any works). It is the closest single number to what the investor earns on their own money.
Yield and the lender's rent test
A strong yield is not the same as passing the lender's rent test. Buy-to-let lenders test the rent against the interest at a stress rate and a cover ratio, typically 125% for limited companies and 145% for higher-rate taxpayers, so a property can show a healthy yield and still cap the loan. Check the maximum loan with the ICR calculator.
Commercial property yields
Commercial valuers usually quote a net initial yield: the rent divided by the price plus the buyer's purchase costs (stamp duty, legal and agent's fees). It is lower than the simple gross yield on the same deal. Work out the stamp duty part with the commercial stamp duty calculator.
Questions brokers ask
How do you calculate rental yield?
Gross yield is the annual rent divided by the price, times 100. Net yield deducts running costs such as management, voids, insurance, repairs and service charge from the rent first.
What is a good rental yield in the UK?
It depends on the area and the property type. Many investors look for 5–7% gross on a standard buy-to-let and more on HMOs and semi-commercial, but net yield and cash flow after the mortgage matter more than the headline figure.
What is cash-on-cash return?
The annual cash flow after mortgage interest and costs, divided by the cash the investor put in, including deposit, stamp duty and fees.
Does a high yield mean the mortgage will pass?
Not necessarily. Lenders test the rent against stressed interest at a cover ratio such as 125% or 145%. Check the loan with an ICR calculator.
What is net initial yield on commercial property?
The annual rent divided by the price plus the buyer's purchase costs. Commercial valuers and investors use it to compare deals.
More tools for brokers
Buy-to-let ICR calculator
Maximum loan from the rent at any cover ratio and stress rate, and the rent needed for a target loan.
Open →Free to useCommercial stamp duty calculator
SDLT on commercial and mixed-use purchases, and on the rent of a new commercial lease (NPV at 3.5%).
Open →IncludedProperty check for brokers
One postcode: sold price comps, EPC & MEES, stamp duty, flood warnings, HMO licensing and Article 4, printed as a client-ready deal pack.
Open →Source the case in the same place
DAS Source compares specialist BTL, Ltd Co/SPV, HMO, MUFB, semi-commercial and commercial lenders in seconds. The broker tools come with every plan. £50 a month per firm after a 7-day free trial.
Start 7-day free trial