Rental Yield
What is a good rental yield in the UK?
A gross rental yield of 5–6% is generally considered solid for a UK buy-to-let, with anything above 7% strong. Yield is calculated as annual rent divided by purchase price, expressed as a percentage. Net yield, which deducts running costs (management, insurance, voids, maintenance, mortgage interest), is usually 1.5–2.5 percentage points lower than gross.
Yields vary sharply by region. Northern England, Scotland and parts of Wales routinely deliver 7–9% gross on terraced housing and HMOs. London and the South East rarely exceed 4–5% gross, with capital growth doing the heavy lifting. Student lets and HMOs tend to outperform single-family lets on yield but carry higher voids and licensing costs.
Run live numbers through the Homedata rental yield calculator, and benchmark against ONS rental data and Land Registry sale prices for the postcode.
What this means in practice
A two-bed terrace in Bradford BD7 bought for £110,000 and let at £750 pcm gives £9,000 annual rent — gross yield 8.2%. Against the same £110,000, a comparable flat in Croydon CR0 lets at £1,250 pcm: £15,000 annual, gross yield 13.6% on price but the Croydon flat actually trades closer to £230,000, dropping the real yield to 6.5%. The Bradford terrace beats it on yield. Capital growth tells the opposite story — Croydon prices grew 38% over the past decade against Bradford's 22% (HM Land Registry HPI). Yield-led investors weight the North; growth-led investors weight the South.
Related questions
How is net rental yield calculated?
Net yield = (annual rent − annual costs) ÷ purchase price × 100. Standard deductions are: agent management (8–12% of rent), buildings insurance (£200–£400), gas safety + EPC + electrical reports (£200/year averaged), routine maintenance (1% of property value), void allowance (one month per year is conservative), and ground rent or service charges for leasehold flats. Mortgage interest is sometimes included in net yield calculations and sometimes excluded — be explicit which definition you are using when comparing properties.
Do HMOs deliver better yields than single lets?
Typically yes, often by 2–4 percentage points gross. A four-bed terrace let to a single family at £1,200 pcm becomes a four-bedroom HMO at £550 per room — £2,200 pcm, an 83% rent uplift. Costs rise to match: HMO licence (£500–£1,500 per five years), stricter fire safety, additional gas/electrical certification, higher void exposure between individual room tenancies, and higher management fees. Article 4 directions in cities like Nottingham and Birmingham also restrict where new HMOs can be created.
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