How to Calculate Rental Yield: Gross, Net and the Costs Landlords Miss

Gross rental yield is the annual rent divided by the property's value, multiplied by 100: £13,200 a year on a £220,000 property is 6%. Net yield deducts the costs of letting first, and in England those costs now include recurring legal requirements such as the annual gas safety check and, once registration opens in each region from 15 December 2026, the £65 per property annual registration fee.

This article is for general information purposes only and does not constitute legal, financial or tax advice. Landlords should seek independent professional advice for their specific circumstances. The yield formulas apply anywhere; the compliance costs described are those that apply to private landlords in England.

What is the formula for rental yield?

There are two standard formulas, and the difference between them is costs. Gross yield uses the rent alone. Net yield subtracts the annual costs of letting the property before dividing by its value.

Property value, meaning either the purchase price or the current market value, should be stated alongside the result. Using the purchase price shows how the original investment is performing. Using today's value shows what the capital tied up in the property is earning now.

All three figures are usually calculated before tax. Tax depends on whether the property is held personally or through a company and on the owner's other income, so it is normally assessed separately with an accountant.

How do you calculate gross rental yield?

Multiply the monthly rent by 12, divide by the property value, then multiply by 100. A property worth £220,000 let at £1,100 a month earns £13,200 a year, which gives a gross yield of exactly 6%.

Gross yield is useful for screening. It is the figure most often quoted in listings and area reports, and it is quick to compare. Its weakness is that two properties with the same gross yield can produce very different returns once service charges, repairs and compliance costs are deducted.

How do you calculate net rental yield?

Deduct every annual cost of letting the property from the annual rent, then divide by the property value and multiply by 100. The result depends heavily on which costs are included, so it helps to list them in full rather than relying on a single percentage allowance.

Capital repayments are not a cost for yield purposes. They reduce the loan and increase the landlord's equity rather than being money spent on running the property.

Should mortgage interest be included?

It depends on the question being asked. Net yield before finance leaves mortgage interest out, so properties can be compared on their own merits whatever the funding. Net yield after finance includes mortgage interest and shows what the property earns for this particular landlord.

Both are legitimate, but they produce very different numbers, as the worked example below shows. The LLCR rental yield and ROI calculator includes mortgage interest in its net yield figure, so its result is a net yield after finance.

Which compliance costs do landlords in England forget?

The recurring legal requirements of letting are the costs most often left out of yield calculations. Each one is small on its own, but together they are a fixed annual cost that does not fall when the rent does.

The registration fee is new. GOV.UK guidance for landlords states that the annual service fee is £65 per property, and registration opens region by region from 15 December 2026, starting in the West Midlands. The fee is pro-rated during the rollout, and each region has its own registration window.

Two further costs are worth planning for even though they are not annual. The government's January 2026 response to its consultation on privately rented homes set a target of an EPC C equivalent standard by 1 October 2030, with a cap of £10,000 per property on the spending required; at that point the regulations still had to be made, and as of November 2026 they had not been laid. Our article on whether an existing EPC will still count in 2030 tracks what has been confirmed. Any remedial electrical or gas work found during an inspection is also a cost on top of the inspection fee.

A worked example: gross yield, net yield and return on cash

The figures below are illustrative assumptions for one property, not market rates. Real costs vary by area, property type and contractor.

Assumptions: property value £220,000; rent £1,100 a month; £60,000 of the landlord's own cash invested; mortgage interest £5,500 a year.

The compliance lines total £195 a year in this example, about 1.5% of the rent. Leaving them out would overstate net income by that amount every year, and a single licence fee or remedial job would make the gap larger.

What is a good rental yield?

There is no single benchmark. Yields vary by region, property type and the price paid, and a higher yield often comes with higher costs, more tenant turnover or weaker capital growth. Comparing net yield after all costs, rather than gross yield alone, gives a more reliable basis for comparing two properties.

The rent side of the calculation is also governed by law. Under section 13 of the Housing Act 1988, as amended by the Renters' Rights Act 2025, rent on an assured periodic tenancy is generally increased using the Form 4A procedure, and a tenant can challenge the proposed rent at the First-tier Tribunal. Our guide to Form 4A and section 13 rent increases sets out the rules, so any rent growth assumed in a yield forecast should reflect them.

How to work out your own rental yield

1. Write down the annual rent: the monthly rent multiplied by 12.
2. Decide which property value you are using, purchase price or current value, and note it.
3. Divide the annual rent by the value and multiply by 100. That is the gross yield.
4. List every annual running cost, including each compliance requirement in the table above.
5. Subtract those costs from the rent and divide by the value. That is net yield before finance.
6. Subtract mortgage interest as well for net yield after finance, and divide by your own cash invested for the return on cash.
7. Repeat the calculation each year, using the actual costs from your records rather than estimates.

Rent increases and the LLCR Academy

LLCR Academy, the training arm of LLCR, is developing a course called Rent Increases Under the New Rules: Section 13 and Form 4A (England). The planned nine lessons cover the section 13 process, setting the figure, tenant challenges at the tribunal, and keeping the rent record. It is in development, and the course page takes waitlist sign-ups.

Keeping the cost figures accurate

A yield calculation is only as good as the cost figures behind it. The LLCR platform is designed to hold each property's certificates with their dates, so the recurring compliance costs and renewal dates for gas safety, electrical inspections and EPCs are in one place when the annual figures are worked out. The rental yield and ROI calculator is free to use, and LLCR is free for one property.

Not sure which compliance costs apply to your property? The free LLCR compliance checker takes a few minutes and shows where a property stands on the main certificates and checks.