Try for free

Start Free Trial

Free Rental Yield Calculator

Calculate Property Rental Yield With Our Free Rental Yield Calculator

Calculate your cash flow and return on investment by entering your property price, monthly rent, annual expenses, and average vacancy rate below.

Property Price


£

Monthly Rent


£

Annual Expenses


£

Vacancy Rate (%)

Calculate
Gross Yield

0.00%

Per Year

Net Yield

0.00%

Per Year

Cashflow

£0.00

Per Year

Payback period

0 Years

of Investing

income expense tracker banner
income expense tracker

Why Use Our Rental Yield Calculator


Estimate a properties performance

Before you purchase an investment property, you can calculate the current rental yield to determine the profitability of the asset. You need to know the purchase price, the current estimated rental return for and cash flow as well as an estimate for operational expenses and average vacancy rates.

Understand an existing asset’s performance

You want to keep an eye on your property’s rental yield to ensure that your investments are achieving the returns that are required and make any necessary changes.

For example, you might have more expenses than you expected and need to look at ways of reducing these overheads.

What is Rental Yield?

Rental Yield is a measurement that investors use to understand an income-generating asset’s performance over the course of a year. It measures how much cash your investment produces as a percentage of the asset’s value. In real estate then it is the rental income as a percentage of the property’s value.

When thinking about rental yield there are two terms you need to be familiar with: gross yield and net yield.

Gross yield

Gross yield is the return on your investment before expenses and vacancies are taken into account. Gross yield also does not take interest rates into account. Gross rental yield is a common metric to look at when analysing returns as it is simple to calculate letting you easily compare properties.

How to Calculate Gross Rental Yield

You take the ‘Annual rental income’ and divide by the ‘Property value’. Then multiply this number by 100 to get a percentage value.

Gross Yield Example:

Property value £600,000. Expected rent £3,000 a month.

£3,000 x 12 = £36,000 (annual rental income)

(£36,000 /£600,000) x 100 = 6% gross rental yield

Net Yield

Net yield takes into account any expenses or other outgoings such as maintenance costs, mortgage payments and insurance. Net yield is sometimes referred to as a rate of return. Because it takes into account these expenses it gives a more accurate picture of an investment’s cash flow than gross yield.

How to Calculate Net Rental Yield

Take the ‘Annual rental income’ and subtract the ‘Annual expenses’. Then divide this number by the ‘Property value’ and then multiply by 100 to get a percentage value.

Net Yield Example:

Property value £600,000, expected rent £3,000 a month and expenses/loss £6000.

£3,000 x 12 = £36,000 (annual rental income)

((£36,000 – £6000)/£600,000) x 100 = 5% Net Rental Yield

Cash Flow


A rental asset should have a positive cash flow even after surprise expenses. You will want to calculate how quickly you can make a property positive after your initial expenses immediately after purchasing the property (eg. renovations).

This should be considered on a yearly basis as well as an overall basis to give yourself the best possible understanding of your property’s cash flow.

Payback Period


This is how long it will it take to breakeven on your investment. We work this out in our calculator from your cash flow, vacancy rate, and property purchase price. However, you should also consider mortgage interest rates when calculating this.

What is a Good Rental Yield?

There’s no universal answer to this question. Determining the strength of an investment depends on numerous factors. For example, your overall investment goals and intentions. For example, if your goal is to live off the income from cash-generating assets then you will want a higher net rental yield.

However, if you are thinking long term and are aiming to build a sizable portfolio, then you might accept a lower rental yield.

Factors that may influence your decisions outside of rental yield calculations include market factors, such as local investment in the area, the current rate of appreciation, how long you’re going to old the property, average occupancy rates, your overall investment goals, and potential risks such as plans to open an airport nearby.

A high rental yield is certainly a good thing to have. However, the best investors consider as many facets of their investment as possible.

Occupancy Rates

Is the property in a desirable location, near the town centre, near public transport?

Holding period

How long do you plan to hold onto the property?

Appreciation

How much appreciation has the area experienced over the last 20 years? And how much can you expect over the holding period of the property?

Investment Strategy

What is your overall investment strategy? Build wealth for retirement? Supplement your existing cash flow?

Risks
  • Are there any local developments that might damage the value of the property?
  • Are there any signs indicating a property bubble in the area?
  • Are new legislations going to increase your required expenses (such as new EPC legislations)?

Increasing Cash Flow for a Good Rental Yield

  • Choose markets with high rental demand and manage your tenancies efficiently;
  • Spend money to make money: Simple renovations like a fresh repaint will allow you to enjoy premium rent;
  • Rent by the room;
  • Increase marketing efforts to avoid vacancy;
  • Utilise all income producing assets in your property (parking lot, laundry room, etc).
×

Start your free trial of Landlord Studio

Start Free Trial

Try Landlord Studio free for 14 days, no credit card required. Plans start from £5.99/month.