Glossary
Rental yield
Also called: yield, gross yield, net yield
Rental yield is a property's annual rent expressed as a percentage of its price or value. Gross yield uses rent before costs; net yield deducts vacancy and operating expenses first, giving a truer picture of the return from income.
An example
An investor comparing two units multiplies each weekly rent by the number of weeks in a year and divides by the price. They then repeat the calculation after allowing for vacancy, rates, insurance and management to compare net yields.
Why it matters
Yield helps compare income across properties and is used by lenders and valuers for commercial assets. It does not include interest, tax or capital growth, so it is one input into a decision, not the whole picture.
Points to check
Check whether a quoted yield is gross or net, and which costs have been deducted. Compare yields using the same basis across properties. Lenders often focus on net income and interest cover rather than yield alone. Test how vacancy, rent reviews or increased outgoings would change the figure, and use the rental yield calculator to compare options on a consistent basis.
Try it: Rental yield calculator