Net Yield
Annual rental income minus all operating costs, expressed as a percentage of the property price.
Net yield gives you a far more accurate picture of a property's true return than gross yield. It accounts for real-world running costs that eat into your rental income.
Net Yield = ((Annual Rent − Annual Costs) ÷ Property Price) × 100
What Costs Are Included?
Typical costs deducted to calculate net yield include:
- Letting agent fees (typically 8–12% of rent)
- Service charges and ground rent (leasehold properties)
- Insurance (buildings and landlord)
- Maintenance and repairs (budget 5–10% of rent)
- Void periods (empty months between tenants)
Note that mortgage payments are generally not included in net yield — they are a financing cost, not a property cost. This keeps net yield comparable across cash and leveraged purchases.
A Realistic Example
A property bought for £200,000 generating £12,000/year rent with £4,000/year in total costs would have:
- Gross yield: 6%
- Net yield: 4%
That 2% difference represents real money — £4,000 per year that many investors fail to account for when buying based on headline yields alone.