How to read a rental yield number properly

A yield number on a property listing tells you almost nothing on its own. It's calculated one way, quoted without context, and almost always gross. If you're comparing opportunities on headline yield alone, you're comparing marketing copy, not investments.

Gross yield is annual rent divided by purchase price. Simple, and simple to inflate. A property advertised at a punchy 8% gross yield in a low-demand area might carry high voids, a tenant profile that turns over every six months, and a service charge that eats a third of the rent before you've paid anything else. Meanwhile a property at 5.5% gross yield in a stronger location might let continuously, need almost no intervention, and hand you more cash at the end of the year.

Net yield is where the real comparison happens. Take annual rent, subtract service charge, ground rent, insurance, management fees, an allowance for maintenance, and a realistic void assumption, then divide by purchase price plus the costs of acquiring it. That last part matters too: stamp duty, legal fees, and any refurbishment should sit in the denominator if you want an honest figure, because that's capital you actually committed.

If you're comparing opportunities on headline yield alone, you're comparing marketing copy, not investments.

Voids are the number most new investors underestimate. Even a well-let property will sit empty for a period between tenancies, and if you're assuming zero void in your yield calculation, you're not calculating a yield, you're calculating a best case. A realistic allowance depends on the property type and area, but building in even two to three weeks a year changes the picture meaningfully on a lower-value property.

Service charges are the other one that quietly wrecks headline numbers, particularly on newer flats. A high-spec new build with a gym, concierge, and landscaped grounds sounds attractive until you see the annual charge, which can run into thousands of pounds a year regardless of whether you use any of it. That figure needs to come off the top of your yield calculation, not get treated as a separate line item you'll deal with later.

So what does a genuinely good net yield look like in 2026? As a rough guide, most experienced investors are treating anything from 5% to 6% net as solid for a well-located property with strong tenant demand and low management burden. Numbers meaningfully above that usually come with a trade-off somewhere, whether that's location risk, tenant quality, or a property type that's harder to finance or exit. Numbers below that can still work, but only if the capital growth case is doing the rest of the heavy lifting.

Yield also isn't the only number that matters, and treating it as the sole decision criterion is how investors end up with properties that look good on a spreadsheet and badly on paper five years later. Yield tells you about income today. It says nothing about capital growth, about how easy the property will be to sell, or about how the finance behind it will behave if rates move. A property with an average yield in a strong location with genuine tenant demand will usually outperform a high-yield property in a weak one, once you account for total return rather than income alone.

The practical takeaway is to ask for net, not gross, every time a yield figure is quoted to you, and to ask what assumptions sit behind it. If nobody can tell you the void assumption or whether service charge has been deducted, treat the number as marketing until proven otherwise.