Published 14 May 2026
Rental yield is the most quoted and least understood figure in property investment. Understanding the difference between gross and net yield is the single most valuable piece of financial literacy a new investor can acquire.
Gross yield is annual rent divided by purchase price. A property costing £200,000 and renting for £1,000 per month produces £12,000 a year, a gross yield of 6%. It is simple, comparable and almost never what you actually receive.
Net yield subtracts the real costs of ownership: service charge, ground rent, management fees, insurance, maintenance provision, void allowance and compliance costs. On that same property, those might total £3,400 a year, reducing net income to £8,600 and net yield to 4.3%.
The gap between 6% and 4.3% is where investor disappointment lives. It is also where diligence pays: two properties advertising identical gross yields can differ by more than a percentage point net, purely on service charge structure.
A further step is return on capital employed. If you purchased with a 25% deposit, your invested capital is £50,000 plus costs, not £200,000. Net income after mortgage interest, divided by capital actually deployed, is the figure that tells you how hard your money is working.
Our rule is simple: never make a decision on a gross figure. Ask for the full cost schedule, model a realistic void allowance, and stress-test the numbers against a higher interest rate than the one you are being quoted.