The Danger of Headline Yield: Why Gross Yield is Misleading

If you've spent any time on property portals or talking to estate agents, you've heard the term "Gross Yield." It's the most common metric used to sell buy-to-let properties. It's also one of the most dangerous if used in isolation.

Gross yield is a simple calculation: (Annual Rent / Purchase Price) x 100.

While it's useful for a 10-second "back of an envelope" comparison, relying on it to make a final investment decision is a mistake that costs UK landlords thousands of pounds every year.

The "Perfect World" Problem

Gross yield exists in a perfect world—one where a property has no costs, no taxes, no mortgage, and is never empty.

It assumes low or no service charges, minimal maintenance, few voids, cheap management, and stable borrowing costs. For many UK landlords, particularly those with leasehold flats, that world does not exist.

Once service charges, ground rent, repairs, letting fees, void periods, and mortgage interest are taken into account, gross yield quickly loses its usefulness.

A realistic UK example

Consider a very typical scenario.

The property costs £250,000 and rents for £1,200 per month, which is £14,400 per year. On the surface, the gross yield is 5.76 per cent.

Now factor in real costs.

• Annual service charge of £3,200.
• Ground rent of £300.
• Letting agent fees at ten per cent, £1,440.
• Repairs and maintenance at five per cent of rent, £720.
• One month of voids, £1,200.