What Is a Good Rental Yield in the UK? Gross vs Net, and Why the Difference Will Make or Break Your Deal
What counts as a good rental yield in the UK? How to calculate gross and net yield properly, realistic benchmarks by strategy, and why net yield on cash invested is the only number that matters.
Ask five investors what a "good" rental yield is and you'll get five confident, different answers — because they're usually calculating five different things. A 7% yield can be a great deal or a slow-motion loss depending on what's in the 7%.
Let's define the terms properly, put realistic benchmarks against each strategy, and settle on the one yield figure worth underwriting.
Gross yield: the estate agent's number
Gross yield = annual rent ÷ purchase price × 100
A £150,000 house renting at £825/month: £9,900 ÷ £150,000 = 6.6% gross.
Gross yield is fine for a 30-second comparison between areas and nothing more. It ignores every cost of actually running the property — which is exactly why it's the number on the sales particulars.
Net yield: the landlord's number
Net yield = (annual rent − operating costs) ÷ total money invested × 100
Two upgrades happen in this formula, and both matter:
The numerator loses the costs. Management (10–15% if managed), maintenance allowance, insurance, compliance certificates (gas safety, EICR, EPC), voids (budget 4–8%), ground rent/service charges on leaseholds, and — for HMOs — bills. On a normal single let these commonly absorb 20–30% of the rent; on a bills-included HMO, 30–40%.
The denominator gains the truth. Not just the purchase price, but stamp duty (including the 5% additional-property surcharge), legal fees, survey, refurb, and furnishing. Your yield is earned on every pound you put in, not just the pound that went to the vendor.
Rerun the example: £9,900 rent − 25% costs = £7,425. Total money in: £150,000 + £8,000 SDLT & fees + £6,000 light refurb = £164,000. Net yield = 4.5%. Same property, and a third of the headline gone — before the mortgage.
So what's actually "good"? Benchmarks by strategy
Yields vary enormously by region — northern cities and the Midlands typically out-yield London and the South East by several points, in exchange for slower historical capital growth. Directionally, in the current market:
| Strategy | Typical gross | A "good" net (on total cash in) |
|---|---|---|
| Single let, prime South East | 4–5% | 3–4% — you're mostly buying growth |
| Single let, Midlands/North | 6–8% | 5%+ |
| HMO (bills incl.) | 10–15% | 8%+ after full HMO costs |
| Purpose-bought social/serviced models | varies | underwrite case-by-case |
Two rules sit above the table:
- A yield is only "good" against its risk and effort. An 8% net HMO with licensing obligations and five tenants is not the same product as a 5% net single let with a ten-year tenant.
- The deal must survive the mortgage stress test. Lenders test rent coverage at stressed rates (ICR); a yield that can't cover stressed interest isn't financeable at your assumed leverage, whatever the spreadsheet says.
The metric better than both: ROI on cash employed
Once you use mortgage finance, yield stops being the decision metric. What you actually care about is:
ROI = annual net cashflow (after finance) ÷ cash left in the deal × 100
Two properties with identical 6% net yields can produce wildly different ROIs depending on leverage, rate, and how much cash a refinance returns. This is the number that tells you whether your £40,000 of deployed capital is working at 4% or 14% — and it's the number to compare against simply putting the money elsewhere.
Watch the forward costs too: with rented homes heading for a minimum EPC C by 2030 under current government plans, a cheap high-yielding EPC E terrace may be carrying a £5–10k energy-efficiency bill that belongs in today's denominator, not tomorrow's surprise.
Run yields the honest way
PropCalc calculates gross yield, net yield on total cash in, monthly cashflow, and ROI for any UK address — with the property's listing history, EPC rating, and council tax band pulled in beside the numbers, and Deal Verdict telling you the maximum price at which the deal still hits your target. Start your free 7-day trial and see what your next deal really yields.
FAQ
Is a 7% rental yield good in the UK? A 7% gross yield is above the national average and typical of stronger-yielding regions. Whether it's good depends on what's left after costs: at normal single-let operating costs it might net 5% — solid — but confirm it on total cash invested, not purchase price.
Why is my real yield lower than the advertised yield? Advertised yields are gross (rent ÷ price) and ignore operating costs, voids, stamp duty, refurb, and fees. Net yield on total money invested is routinely 2–4 percentage points lower.
Should I chase yield or capital growth? They historically trade off by region. Cashflow (yield) pays you to hold; growth pays you at exit. Most sustainable portfolios need enough net yield to hold comfortably through rate cycles — a growth bet that can't cash flow is a margin call waiting for a date.
Calculations in this article are illustrative estimates only and do not constitute financial, legal, or investment advice.