Rental Yield: How to Judge a Buy-to-Let Properly
Rental yield tells you what a property earns relative to its price — but gross yield flatters and net yield tells the truth. Here is how to use both.
What rental yield is
Rental yield is the annual rental income of a property expressed as a percentage of its price. It is the fastest way to compare buy-to-let opportunities — but only if you know which yield you are looking at.
Gross yield vs net yield
Gross yield = (Annual rent ÷ Property price) × 100
Net yield = ((Annual rent − Annual costs) ÷ Property price) × 100
A €300,000 flat rented at €1,500/month:
| Metric | Calculation | Result |
|---|---|---|
| Gross yield | 18,000 ÷ 300,000 | 6.0% |
| Annual costs | service charge, insurance, maintenance, management, voids | €4,500 |
| Net yield | (18,000 − 4,500) ÷ 300,000 | 4.5% |
Gross yield flatters. Net yield is what you actually earn.
Use the rental yield calculator to model both, including void periods and costs.
What counts as a cost
- Mortgage interest (if financed)
- Property management fees (often 8–12% of rent)
- Service charges and ground rent
- Insurance
- Maintenance and repairs
- Void periods — weeks with no tenant
- Letting fees and tenant turnover costs
Ignoring voids and maintenance is the classic way to overestimate a deal.
Yield vs total return
Yield is income only. Total return also includes capital growth:
Total return = Net yield + capital appreciation
A 3% yield with 5% annual price growth can beat an 8% yield in a stagnant market. Decide whether you are investing for income, growth, or both.
Cash-on-cash: the leveraged view
If you borrow, the metric that matters is the return on the cash you actually put in:
Cash-on-cash = Annual pre-tax cash flow ÷ Cash invested
A mortgage amplifies both gains and losses, so stress-test the numbers at a higher interest rate. Start with the down payment calculator to see how much capital is tied up.
A simple due-diligence checklist
- Verify realistic market rent, not the asking rent.
- Budget 5–10% of rent for maintenance and voids.
- Stress-test at +2% interest.
- Check local rules: rent controls, licensing, tax treatment.
- Compare net yield against your alternatives.
Run the numbers
Model gross yield, net yield and cash flow with the free rental yield calculator — instant and private.