Yield is the number property investors use to compare deals, but it is also the number most often misunderstood. Two properties can advertise the same yield and deliver completely different returns, because one figure is gross and the other is net.
In this guide we explain the difference, how to calculate each one, and why net yield is the only number that really matters.
What is gross yield?
Gross yield is the annual rent divided by the property's price, expressed as a percentage.
Gross yield = (annual rent ÷ purchase price) × 100
For example, a property bought for £150,000 and rented at £900 per month:
- Annual rent: £900 × 12 = £10,800
- Gross yield: £10,800 ÷ £150,000 = 7.2%
Gross yield is quick to calculate and useful for a first comparison between areas or properties. But it ignores every cost of owning the property, which is why it should never be the final number you rely on.
What is net yield?
Net yield is what remains after the costs of owning and letting the property.
Net yield = ((annual rent − annual costs) ÷ total money invested) × 100
Typical annual costs include:
- Letting and management fees (often 10% to 15% of rent plus VAT)
- Maintenance and repairs
- Insurance
- Service charges and ground rent (for leasehold properties)
- Safety certificates and compliance
- Void periods between tenancies
- Accountancy and licensing where applicable
Total money invested should include the purchase price plus Stamp Duty, legal fees and any refurbishment, not just the headline price.
A worked example
Take the same £150,000 property renting at £900 per month, with £5,000 of purchase costs:
- Annual rent: £10,800
- Management at 12% plus VAT: roughly £1,555
- Maintenance allowance: £750
- Insurance: £300
- Voids and sundries: £500
- Net income: £7,695
- Total invested: £155,000
- Net yield: £7,695 ÷ £155,000 = roughly 5.0%
The gross yield of 7.2% has fallen to around 5.0% once real costs are included. That gap is exactly why two deals with identical gross yields can perform very differently.
Why the difference matters
Marketing uses gross yield
Developers and agents almost always quote gross yields because they are bigger numbers. A new-build apartment advertised at 6% might deliver under 4% net once service charges and ground rent are deducted.
Costs vary enormously between property types
A terraced house might lose 20% to 25% of its rent to costs. A leasehold city centre apartment can lose 40% or more to service charges, ground rent and higher turnover. Comparing gross yields across different property types is almost meaningless.
Net yield is what pays you
Your mortgage, your tax bill and your return on capital all come out of the net figure. Gross yield is a brochure number. Net yield is your actual income.
What is a good net yield in the UK?
There is no universal answer, but as a rough guide:
- Under 4% net: common in London and the South East, and in many city centre apartments. Returns rely heavily on capital growth.
- 5% to 7% net: achievable with standard buy-to-let houses in strong regional markets like the North West.
- 7% plus net: possible with HMOs, below market value purchases and well-run portfolios, though usually with more management involved.
Remember that yield is only half the picture. Capital growth, the quality of the area and how easily you can sell all matter too.
How to improve your net yield
- Buy below market value. Paying less for the same rent instantly raises your yield.
- Choose the right property type. Houses avoid the service charges and ground rent that drag apartment yields down.
- Buy in strong rental areas. Lower voids and stable rents protect your income.
- Keep management efficient. Good agents reduce voids and problem tenancies, which often saves more than their fee.
- Review rents regularly. Rents below the local market quietly erode your yield year after year.
How Vantis Property Group looks at yield
At Vantis Property Group, we assess every deal on its net numbers, not the headline figure. When we share an opportunity with our investor group, we look at realistic rents, genuine comparable evidence and the true costs of ownership, because that is what determines the return you actually receive.
Want to see deals assessed on real numbers? Join our private deal group for access to the latest opportunities we source.
Frequently Asked Questions
What is the difference between gross and net yield?
Gross yield is the annual rent divided by the purchase price. Net yield deducts the costs of owning and letting the property first, and is measured against the total money you have invested.
Which yield should I use when comparing deals?
Net yield. Gross yield is fine for a quick first filter, but only net yield shows what a property will actually pay you.
What costs should I include in a net yield calculation?
Management and letting fees, maintenance, insurance, service charges and ground rent where applicable, compliance costs, and a realistic allowance for void periods.
Is a higher yield always better?
Not necessarily. Very high yields can come with weaker areas, difficult tenants or properties that are hard to sell. Balance yield against area quality, tenant demand and likely capital growth.
Does yield include mortgage costs?
Standard net yield calculations exclude mortgage payments, since those depend on your borrowing. If you want to compare returns on your cash invested, look at return on capital employed after finance costs.
This article is for general information only and does not constitute financial, mortgage, tax, legal or investment advice. Property values and rental income can rise or fall. You should obtain appropriate professional advice before making an investment decision.