Yield: the number everyone quotes and most get wrong

If you're looking at your first buy-to-let, "yield" is the number every sourcer, agent and Instagram guru will throw at you. This guide is for UK first-time investors who want to know what that number actually means, why the quoted version is nearly always the flattering one, and how to run the real maths yourself before you spend a penny.

Gross yield: the headline number

Gross yield is dead simple:

Gross yield = (annual rent ÷ purchase price) × 100

That's it. Rent in, price paid, nothing else. And that's exactly why sourcers love it. It's the biggest number you can honestly produce from a deal, it takes ten seconds to calculate, and it ignores every cost that will actually hit your bank account. A deal sheet that says "8.5% yield!" is quoting gross. Always assume gross unless someone shows you the workings.

Gross yield isn't useless. It's a decent first filter for comparing areas or screening a list of properties. It's just not what you'll earn.

The worked example: a £94,950 terrace

Let's take a real-world-shaped deal and carry it all the way through. A two-bed terrace in the north of England: purchase price £94,950, renting at £675 per calendar month.

• Annual rent: £675 × 12 = £8,100
• Gross yield: £8,100 ÷ £94,950 = 8.5%

Lovely number. Now let's spend it.

Net yield: the same deal after real costs

Net yield takes the same rent and subtracts the running costs of actually being a landlord. Here's an honest year on that terrace:

• Net rental income: £8,100 − £2,444 = £5,656
• Net yield: £5,656 ÷ £94,950 = 6.0%

Budget a cautious 4 weeks of voids instead of 2 and it drops to about 5.6%. So the honest range on this "8.5% deal" is roughly 5.6 to 6.0% net. That's the pattern on almost every deal: knock roughly a quarter to a third off the gross figure.

Self-managing saves the £972 agent fee and pushes net yield back towards 7%, but that's you doing the viewings, chasing the rent and taking the 11pm boiler calls. That's a job, not a yield.

Note: net yield here is before tax and before any mortgage. Your tax position is personal, and that's a separate topic.

Now add a mortgage: cashflow and cash-on-cash

Most people don't buy with cash. Say you take a 75% loan-to-value interest-only mortgage:

• Loan: 75% × £94,950 = £71,212
• Deposit: £23,738

For the interest we'll assume 5.5% purely as an illustration. It is not a quote, rates change constantly, and what you'd actually pay depends on your circumstances. Speak to an FCA-authorised broker for real numbers.

• Annual interest: £71,212 × 5.5% = £3,917, or £326 a month

Monthly cashflow: £675 rent − £326 mortgage − £204 running costs (£2,444 ÷ 12) = £145 a month, about £1,740 a year. Before tax.

Now the return on the money you actually put in. Your real cash in isn't just the deposit:

• Deposit: £23,738
• Stamp duty: £4,748 (see below)
• Legal fees and survey: ~£1,500
• Total cash in: ~£29,986

Cash-on-cash return = £1,739 ÷ £29,986 = 5.8% before tax.

Notice something? At an illustrative 5.5% borrowing cost, the leveraged return is barely different from the unleveraged net yield. When your mortgage rate is close to the property's net yield, debt isn't magnifying much. Rerun it at 6.5% and cashflow falls to roughly £86 a month and cash-on-cash to about 3.4%. Leverage cuts both ways, so say that out loud before you sign anything.

On stamp duty: in England and Northern Ireland, buying a residential property when you already own one usually adds a 5% surcharge on top of standard SDLT rates. At £94,950 the standard rate band is 0% (nil up to £125,000), but the surcharge applies to the whole price: £94,950 × 5% = £4,747.50. Verified at GOV.UK, July 2026 (full bands and traps in the stamp duty guide).

What people forget

Voids. Tenants leave. Budget 2 to 4 weeks empty per year. On this deal that's £312 to £623 a year, and you still pay the mortgage, council tax and utilities while it sits empty. A deal that only works at 52 weeks' rent doesn't work.

Certs and compliance. These are legal requirements, not optional extras: an annual gas safety check by a Gas Safe registered engineer; an electrical installation report (EICR) at least every 5 years; an EPC of at least band E to let the property at all today, and this one's no longer a maybe: the government confirmed in January 2026 that privately rented homes in England and Wales must reach EPC band C (or equivalent under the new EPC metrics) by 1 October 2030, with required spending capped at £10,000 per property. Worth checking before you buy an energy-hungry old terrace; working smoke and carbon monoxide alarms. Small money individually, but they never stop coming.

Rent doesn't rise itself. Under the Renters' Rights Act 2025, in force since 1 May 2026 (and it covers existing tenancies too, not just new ones), you can raise rent once a year at most, not in the first 12 months, with at least 2 months' notice on the prescribed form, and tenants can challenge an above-market increase at tribunal. Your spreadsheet's automatic 5%-a-year rent growth is a fantasy unless the local market delivers it.

Yield vs growth: the trade-off nobody quotes

Here's the uncomfortable pattern: the highest-yielding areas are usually the slowest-growing ones. Cheap northern terraces yield 8%+ gross partly because buyers don't expect much capital growth. Expensive southern property yields 3 to 4% gross partly because buyers are paying for expected growth. You are rarely offered both.

What that means for strategy:

• Chasing yield = income now, slower equity build, and often more hands-on management in cheaper stock.
• Chasing growth = thin or negative monthly cashflow, betting on the sale price years away, and a bet is what it is.

Neither is wrong. But pick deliberately based on whether you need income or can wait for equity. Don't let a sourcer's "8.5%!" pick for you. (Sourcer deal sheets get the same treatment in the BMV guide.)

Mistakes people make

• Comparing a quoted gross yield to your mortgage rate. Compare net yield to your borrowing cost. That's the comparison that decides whether leverage helps or hurts.
• Using asking rent, not achieved rent. Check what similar properties actually let for, not what one optimistic listing asks.
• Forgetting purchase costs in cash-on-cash. Stamp duty, legals and any refurb are real money in. On our example they add ~£6,200 to the deposit, a fifth of the total cash.
• Zero maintenance budget. A boiler is £2,000+. One bad year eats three good ones if you've budgeted nothing.
• Treating yield as fixed. Rates move, rents move, costs only ever seem to go up. Rerun the numbers with the mortgage 1 to 2% higher and see if the deal survives.

Run the full sums (gross, net, then cash-on-cash) on every deal. If the person selling it to you won't show that maths, that tells you something too.

Sources: gov.uk: SDLT residential property rates · gov.uk: landlord safety responsibilities (annual gas safety check) · gov.uk: Electrical safety standards in the private rented sector (EICR every 5 years) · gov.uk: Minimum energy efficiency standard for rented property (EPC band E) · gov.uk, Improving the energy performance of privately rented homes: government response (EPC C by Oct 2030) · gov.uk: Renters' Rights Act overview (rent increases from 1 May 2026)

Education, not financial advice. For mortgage advice, speak to an FCA-authorised broker.

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