Setting rental prices and calculating yields.

If you’re thinking about letting a property, one of your first questions is likely to be: will the numbers work?

You need a clear idea of what you’ll be putting in, what the property could realistically bring back and whether there’s enough room for the costs that come with being a landlord.

Working out the rental yield can help you see how the figures stack up.

Rental yield shows the annual rent from a property as a percentage of its purchase price or current value. To work out the gross rental yield, use this formula:

Gross rental yield = (annual rent ÷ property price or value) × 100

It’s important to know that rental yield will give you an extremely useful starting point, but it won’t tell you the full picture. Your running costs, mortgage, empty periods and the local rental market will all impact how the property performs in practice.

Let’s work through it.

Start by understanding your costs

Before setting the rent or calculating a potential return, make sure you’re clear on what the property will cost you overall.

Some expenses will be easy to predict. Others may be less regular, so it makes sense to leave room for the unexpected.

Your costs are likely to include:

• Mortgage payments
• Letting-agent or management fees
• Landlord insurance
• Maintenance and repairs
• Safety checks and licences
• Service charges and ground rent
• Bills you’ve agreed to cover
• Cleaning and gardening
• Advertising and tenant-finding fees
• Replacement furniture or appliances
• Periods when the property is empty

You may also have upfront costs if you’re buying or preparing a property to let. These could include legal fees, property taxes like stamp duty, as well as refurbishment and furnishing.

Your mortgage payments aren’t included in a standard gross rental yield calculation. They still matter though, because they affect the money you’ll have left each month.

The same is true of tax. Your position will depend on your circumstances, the costs involved and whether you own the property personally or through a limited company.

The common-sense approach is to look at both the headline yield and the pounds and pence you could have left after the bills are paid.

How much rent can I charge?

The amount you’d like to charge and the amount the property could realistically achieve aren’t always the same.

Your costs can tell you whether the property works financially for you. They don’t decide what a tenant will be willing to pay.

For that, you need to look at the local market.

Check comparable properties

Start by looking at properties that are genuinely similar to yours.

Compare:

• The immediate area
• Property type (e.g. detached, terraced, flats or HMOs)
• Number of bedrooms
• Size and layout
• Overall condition
• Energy efficiency (using the government’s EPC checker)
• Furnished or unfurnished properties
• Parking and outdoor space
• Local transport and amenities
• Any bills or services included in the rent

Try not to base your decision on one unusually expensive listing. Look at a range of properties and take the time to research how long they appear to stay on the market as well as the asking rent.

A local letting agent can also give you a rental assessment. As well as suggesting a realistic asking rent, they should be able to tell you whether tenants have plenty of choice or whether demand is keeping the local market moving.

That local knowledge is particularly helpful if you haven’t bought the property yet. It gives you a more reliable figure to use in your yield and mortgage calculations.

A good tenant can be worth holding onto

If you already have a reliable tenant who looks after the property and pays on time, think about what a rent increase could mean in practice.

A higher monthly payment may look appealing on paper. But if the tenant decides to leave, you’re likely to face:

• A period without rent
• Advertising and agent fees
• Cleaning and maintenance costs
• Time spent arranging viewings and paperwork
• The uncertainty of bringing in someone new

That doesn’t mean you should never review the rent. It means the extra income needs to be worth the potential cost and disruption.

Sometimes, keeping a good tenant at a fair market rent can make more financial sense than chasing the highest possible figure.

Follow the current rent-setting rules

The rules depend on where your property is based, so it’s important to understand what applies to you.

If your property is in England, our guide to the Renters’ Rights Act 2025 explains the current rules around setting and increasing rent.

Different rules apply in Scotland, Wales and Northern Ireland.

Could improvements help you charge more rent?

The condition of a property can make a real difference to its appeal to tenants.

You may not need a full refurbishment. Relatively simple improvements could make the home feel brighter, warmer or easier to live in.

Depending on the property, it could be worth considering:

• Fresh paint and flooring
• Better storage
• Updated kitchen appliances
• Improved heating
• Draught-proofing or insulation
• A cleaner, lower-maintenance garden
• Better lighting
• Reliable broadband connections

Before committing to any work, it’s worth speaking to a local letting agent about what tenants in the area value and whether the improvements are likely to support a higher rent.

That was the approach taken by one experienced landlord couple with a portfolio of 40 rental properties. When several tenancies came to an end, they chose to refurbish selected properties before reletting them, with the aim of improving energy efficiency, increasing their appeal and strengthening rental income across the portfolio.

Together provided a £350,000 bridging loan to help fund the refurbishment programme, giving the landlords access to the finance they needed to move their plans forward.

Whatever the scale of the work, look at the cost alongside the realistic rental uplift and wider benefits. An improvement that makes a property more energy efficient, easier to maintain or more attractive to tenants is likely to offer long-term value beyond a higher monthly rent alone.

How to calculate gross rental yield

Gross rental yield compares the property’s annual rent with its purchase price or current value before running costs are deducted.

The calculation has three steps:

1. Multiply the monthly rent by 12.
2. Divide the annual rent by the property price or value.
3. Multiply the result by 100.

A Buy to Let rental yield example

Let’s use recent UK averages to show how the calculation works.

In June 2026, the average price of a flat or maisonette in the UK was £193,711, while the average monthly private rent for a flat or maisonette was £1,355.

Suppose you buy a buy to let flat for that exact price and expect to rent it out for £1,355 a month.

First, calculate the annual rent:

£1,355 × 12 = £16,260

Then divide this by the property’s purchase price:

£16,260 ÷ £193,711 × 100 = 8.39%

The gross rental yield would be 8.39%.

That means the annual rent is equal to 8.39% of the property’s purchase price before costs.

What about refurbishment and furnishing costs?

You may also need to spend money getting a property ready to let.

For example, if you spent £11,000 refurbishing and furnishing the flat above, your total initial outlay would be:

£193,711 + £11,000 = £204,711

Comparing the annual rent with that full initial outlay would give:

£16,260 ÷ £204,711 × 100 = 7.94%

This gives you another way to see how the rental income compares with the amount you’ve invested overall.

However, it isn’t the standard way to calculate gross rental yield. For that, use the property’s purchase price or current value, then consider refurbishment, furnishing and other investment costs separately.

Should I use the purchase price or current value?

Use the purchase price when you’re assessing a property you’re thinking about buying.

Use the current market value when you’re reviewing how a property you already own is performing today.

For example, a property bought several years ago may have risen in value. Using its original price could make the current yield look higher than it would against today’s value.

There’s no problem with calculating both. Just label them clearly so you know what each percentage is telling you.

How to calculate net rental yield

Gross yield gives you a quick way to compare properties, but it doesn’t account for the cost of owning and managing them.

Net rental yield takes those costs into account, giving you a clearer idea of the return the property could produce after day-to-day expenses.

For the calculation below, we’re using a net operating yield before mortgage payments and tax:

Estimated net rental yield = ((expected annual rent after empty periods − annual property running costs) ÷ property price or value) × 100

Using our example of a £193,711 flat generating £1,355 a month in rent, the annual rental income would be £16,260.

Suppose you allow £5,000 a year for empty periods, management, insurance, maintenance and other property costs.

Your estimated net rental income would be:

£16,260 − £5,000 = £11,260

Your estimated net rental yield would be:

£11,260 ÷ £193,711 × 100 = 5.81%

These costs are illustrative, so your actual figures could be higher or lower.

There isn’t one standard definition of net yield. Some calculators deduct costs that others leave out, so check what has been included before comparing one percentage with another.

Mortgage payments and tax aren’t included in this example. You’ll need to consider them separately when working out your expected cash flow.

What information do I need for a rental yield calculator?

A rental yield calculator follows the same formulas and works out the percentage for you.

To get a result that reflects your plans as closely as possible, have these figures ready:

• Purchase price or current property value
• Expected monthly rent
• Expected empty weeks or months
• Annual management and letting fees
• Landlord insurance
• Maintenance allowance
• Service charges and ground rent
• Licensing and safety costs
• Any bills you’ll pay
• Other regular property expenses

Before relying on the result, check whether the calculator is showing gross or net yield. You should also check whether mortgage payments are included, as different tools use the term “net yield” in different ways.

A calculator gives you an estimate based on the figures you enter. It cannot confirm whether you’ll qualify for a mortgage, calculate your tax bill or tell you whether the property is right for your circumstances.

What is a good rental yield?

There isn’t one rental yield that every landlord should aim for.

What looks like a good yield will depend on:

• The location
• Property type
• Tenant demand
• Condition and maintenance needs
• Expected empty periods
• Management costs
• Mortgage costs
• Your wider property plans

The highest percentage isn’t necessarily the strongest opportunity.

A lower-priced property may produce an impressive gross yield but need more hands-on management or regular repairs. Another property may have a lower headline yield but attract longer-term tenants and need less maintenance.

Before deciding whether the numbers work for you, ask:

• Is the expected rent realistic?
• How stable is local demand?
• Have you allowed for empty periods?
• What will the property cost to maintain?
• What happens if costs rise?
• Will the monthly cash flow still work?
• How much time will the property take to manage?

Rental yield is just one measure of how a property could perform. Look at the property, local market, running costs and finance together before deciding whether it meets your plans.

How do empty periods affect rental yield?

A gross yield calculation often assumes you’ll receive rent for all 12 months of the year.

In practice, there may be gaps between tenancies. You could also need time to clean, redecorate or complete repairs before somebody new moves in.

Using our example of a flat generating £1,355 a month in rent, one empty month would reduce the annual rent from £16,260 to £14,905.

The gross yield based on the £193,711 purchase price would then be:

£14,905 ÷ £193,711 × 100 = 7.69%

That’s lower than the 8.39% gross yield based on a full 12 months of rent.

Even where local demand is strong, allowing for realistic empty periods can give you a clearer idea of how the property could perform in practice.

What if I’m considering a short-term let?

Short-term lets need a different approach because the property may be rented by the night rather than by the month.

Suppose you buy a city-centre apartment for £115,000 and spend £3,000 furnishing it.

After the booking platform takes its fee, you receive £72 a night. The apartment is occupied for 177 nights during the year.

Your annual rental income would be:

£72 × 177 = £12,744

Using the property price, the gross income yield would be:

£12,744 ÷ £115,000 × 100 = 11.08%

If you compare the income with the full £118,000 spent buying and furnishing the apartment, the percentage would be:

£12,744 ÷ £118,000 × 100 = 10.80%

Neither figure includes all the costs involved in running a short-term let.

You may also need to allow for:

• Cleaning between stays
• Utilities and broadband
• Linen and consumables
• Management
• Repairs and replacement items
• Insurance
• Local restrictions or permissions
• Periods with lower demand

Short-term letting may produce a higher nightly rate, but it can also involve more costs and day-to-day management. Base your calculations on a realistic number of occupied nights rather than assuming the property will be booked throughout the year.