What is rental yield, and which one should you use?
By Josh GoundryPublished Updated
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Gross yield
Gross yield is annual rent divided by the property’s value. It is the number quoted in most listings, and it answers exactly one question: what does this asset produce, before any of the costs of producing it?
Net yield
Net yield subtracts the running costs — management, insurance, maintenance, ground rent and service charges, void periods — before dividing. It is the number that survives contact with a real year.
Return on equity
Return on equity divides the same net figure by the capital actually tied up in the property rather than by its value. On a leveraged purchase these two diverge sharply, and the divergence is the reason the same property can look mediocre on yield and strong on return.
Frequently asked questions
- What is a good rental yield in the UK?
- There is no single figure, because yield trades off against capital growth — higher-yielding regions have historically shown slower price growth. Compare a property against its own local market rather than a national number.
- Does rental yield include the mortgage?
- Gross and net rental yield do not. Both are calculated against the property's value, so they describe the asset rather than how it was financed. Return on equity is the measure that accounts for a mortgage.