What is a good rental yield?

Most ordinary single-family lets in the US and UK produce gross yields between 5% and 9%, with cheaper regional markets at the higher end and expensive cities at the lower end. A net yield of 5% to 6% after costs and vacancy is generally considered solid; below 4% net usually means the return is coming mainly from expected price growth rather than rental income.

What is the difference between gross and net rental yield?

Gross yield is annual rent divided by purchase price, with nothing subtracted. Net yield subtracts yearly running costs and a vacancy allowance from the rent first, then divides by price, which is why a property can show an 8% gross yield and a 5% net yield at the same time.

Does rental yield include mortgage payments?

No. Both the gross and net yield formulas measure the property's income against its price or value, independent of how it is financed. A separate cash-on-cash return figure is needed to see the actual return once mortgage interest and principal repayments are deducted from rental income.

How much should I budget for vacancy when working out net yield?

A vacancy allowance of 4% to 8% of annual rent is a common working range for stable rental markets, roughly two to four weeks of void per year. Areas with high tenant turnover, student lets, or short-term furnished lets often need a higher allowance, sometimes 10% or more.

Why do expensive properties often have lower rental yields?

Rent tends to rise more slowly than purchase price in desirable, high-demand areas, because buyers there are often paying a premium for expected capital growth rather than income. That is why the 420,000 apartment in the worked example above yielded less than the 150,000 flat despite renting for nearly double the monthly amount.

Can I deduct mortgage interest before calculating rental yield in the UK?

For yield calculations, you can subtract whatever costs you choose, but for UK income tax purposes individual landlords have not been able to deduct mortgage interest from rental income since April 2020; they instead receive a basic-rate tax credit instead, which is a separate calculation from the yield figure itself.

Rental yield calculator

Rental yield is the shorthand landlords use to compare a flat in one postcode against a house in another without pricing an entire mortgage. Gross yield divides a year of rent by the purchase price; net yield goes further and takes running costs and expected vacancy off the top first, which is why the two numbers on the same property can look several points apart.

What counts as a healthy yield

Gross yields on ordinary single-family lets in most US and UK markets tend to sit somewhere between 5% and 9%, with the higher end concentrated in cheaper regional towns and the lower end in expensive coastal or capital-city markets where price growth, not income, is the main return. A gross yield under 4% usually signals a market priced for capital appreciation rather than cash flow, while anything above 10% is worth double-checking for an unusually risky tenant pool or a property needing heavy upkeep.

Net yield strips out insurance, repairs, letting agent fees, ground rent or service charges, and a vacancy allowance, so it typically lands two to four percentage points below the gross figure. A property advertised at an 8% gross yield often nets closer to 5% once real running costs are counted, and that gap is exactly what this calculator's net-yield mode is built to expose before you commit to a purchase.

Three properties compared side by side

A 250,000 terraced house renting for 1,500 a month brings in 18,000 a year, for a gross yield of 7.2%. Add 4,200 in yearly costs (insurance, maintenance, letting fees) and a 5% vacancy allowance, and net income falls to 12,900, giving a net yield of 5.16%.

A 420,000 city-centre apartment renting for 2,100 a month looks similar on the surface, with 25,200 in annual rent for a 6% gross yield. But service charges and management fees push yearly costs to 7,800, and void periods run higher at 8% here, so net income is only 15,384 — a net yield of 3.66%, nearly a point and a half below the cheaper terraced house despite the apartment costing almost twice as much.

A 150,000 ex-local-authority flat renting for 1,100 a month has the highest headline number: 13,200 in annual rent is an 8.8% gross yield. With lower running costs of 2,600 a year and a tight 4% vacancy rate, net income comes to 10,072, a net yield of 6.71% — the strongest of the three once costs are counted, even though its price tag and monthly rent are both the smallest of the group.

What the yield figure leaves out

Neither yield calculation includes mortgage interest, so a highly leveraged purchase can show a healthy net yield on paper while still losing money once loan repayments are deducted; that combined figure is what a cash-on-cash return calculation is for, not this one. A cash buyer and a buyer with a 75% mortgage on the same property will see identical yield numbers but very different amounts of cash actually landing in a bank account each month.

The net-yield version treats vacancy as a flat percentage applied evenly across the year, which understates the damage from a single bad three-month void between tenancies and overstates the effect of predictable short gaps during a routine changeover. It also assumes the rent entered will hold steady; a tenant who falls into arrears, or a market where rents are falling, will produce a worse actual result than the projected yield suggests.

Capital growth, refurbishment costs before letting, and one-off costs like a new boiler or a full rewire sit outside both formulas entirely. A property with a mediocre yield but a strong track record of price appreciation in its local market can still be the better long-term hold, which is a separate question from the income return this calculator measures.

Tax and market differences to check before buying

In the UK, since April 2020 individual landlords can no longer deduct mortgage interest from rental income before calculating income tax; instead they receive a basic-rate tax credit on the interest paid, which pushes many higher-rate taxpayers to hold rentals through a limited company for lower corporation tax rates on retained profit. That structural change makes a UK net yield figure incomplete for tax purposes even when the running-cost inputs are accurate.

In the US, mortgage interest, depreciation, and most operating expenses remain deductible against rental income on a Schedule E, and depreciation recapture only becomes relevant on sale, so the gap between a pre-tax net yield and the after-tax cash return is usually smaller than in the UK for an equivalent leveraged purchase.

Local rules on rent control, licensing fees for houses in multiple occupation, and mandatory safety certificates vary by city and state and can add several hundred a year to running costs that a generic yield calculation will not anticipate; check the specific local authority or state housing agency rules for the property's location before finalising the costs entered into the net-yield calculation.

Frequently asked questions

What is a good rental yield?: Most ordinary single-family lets in the US and UK produce gross yields between 5% and 9%, with cheaper regional markets at the higher end and expensive cities at the lower end. A net yield of 5% to 6% after costs and vacancy is generally considered solid; below 4% net usually means the return is coming mainly from expected price growth rather than rental income.
What is the difference between gross and net rental yield?: Gross yield is annual rent divided by purchase price, with nothing subtracted. Net yield subtracts yearly running costs and a vacancy allowance from the rent first, then divides by price, which is why a property can show an 8% gross yield and a 5% net yield at the same time.
Does rental yield include mortgage payments?: No. Both the gross and net yield formulas measure the property's income against its price or value, independent of how it is financed. A separate cash-on-cash return figure is needed to see the actual return once mortgage interest and principal repayments are deducted from rental income.
How much should I budget for vacancy when working out net yield?: A vacancy allowance of 4% to 8% of annual rent is a common working range for stable rental markets, roughly two to four weeks of void per year. Areas with high tenant turnover, student lets, or short-term furnished lets often need a higher allowance, sometimes 10% or more.
Why do expensive properties often have lower rental yields?: Rent tends to rise more slowly than purchase price in desirable, high-demand areas, because buyers there are often paying a premium for expected capital growth rather than income. That is why the 420,000 apartment in the worked example above yielded less than the 150,000 flat despite renting for nearly double the monthly amount.
Can I deduct mortgage interest before calculating rental yield in the UK?: For yield calculations, you can subtract whatever costs you choose, but for UK income tax purposes individual landlords have not been able to deduct mortgage interest from rental income since April 2020; they instead receive a basic-rate tax credit instead, which is a separate calculation from the yield figure itself.

Sources

Office for National Statistics, Private rent and house prices, UK — Publishes the latest UK annual percentage change in private rents by country and region, updated monthly as of 2026.
HUD USER, Fair Market Rents dataset — HUD's Office of Policy Development and Research publishes 40th-percentile Fair Market Rents by county and metro area, the federal reference used to set voucher payment standards, updated annually.