Gross yield vs net yield: which number actually matters?

Gross yield is what most listings quote: annual rent divided by purchase price. It's a fast way to compare properties, but it assumes full occupancy, no management costs and no repairs, which is not how letting a property actually works. Net yield corrects for that by deducting voids, letting fees and maintenance before you compare properties, and it's the figure worth trusting.

On a £200,000 property let at £1,000 a month, gross yield is a clean 6%. Apply a 4-week void allowance, a 10% management fee and 1% maintenance, and the effective rent after voids falls to £11,077, minus £1,108 in fees and £2,000 in maintenance, leaving £7,969, a net yield of 3.98%.

Gross vs net, worked through

£200,000 property, £1,000/month rent: gross yield = £12,000 ÷ £200,000 = 6%. After a 4-week void allowance (£11,077 effective rent), a 10% management fee (£1,108) and 1% maintenance (£2,000): net yield = £7,969 ÷ £200,000 = 3.98% (before mortgage costs).

If a listing only quotes gross yield, treat it as a starting point for comparison, not a number you can bank, and run your own net yield figure before you get attached to the property.

Why do voids, management fees and service charges quietly wreck your headline yield?

The gap between 6% and 3.98% above comes from three ordinary costs stacking together. A 4-week void allowance is close to typical, since many letting agents build in three to four weeks of vacancy a year between tenancies as standard practice. A fully managed letting service usually costs 10-15% of monthly rent (Which?, 2026), and maintenance rarely comes in below around 1% of a property's value in a typical year once you average boiler servicing, appliance repairs and general upkeep. None of these costs is large on its own; together they took a third off the headline yield in the example above.

Buy a leasehold flat rather than a freehold house and there's a fourth cost to add: the service charge, plus any ground rent. These commonly run from a few hundred pounds a year on a small, well-run block to well over £2,000 a year where there's a lift, communal heating or an active managing agent, and unlike a void month it doesn't shrink just because the flat sits empty. Add the real figure to the calculator above and a flat that looked competitive on gross yield can end up with a noticeably thinner net yield than an equivalent freehold house.

If you're self-managing rather than paying an agent, rerun the calculator with a lower management fee, and if the property is leasehold, don't skip the service charge field: together they're the inputs most likely to be distorting your real return.

Why does an interest-only mortgage change your cash flow numbers?

Most buy-to-let mortgages in the UK are arranged interest-only, and it matters. On the £150,000 mortgage (75% LTV) in the example above, at a 5.5% interest-only rate (Moneyfacts, July 2026), the annual cost is £8,250, none of which reduces the £150,000 owed. Set against the £7,969 net operating income calculated earlier, pre-tax cash flow actually turns negative: roughly -£281 a year, or about -£23 a month. A repayment mortgage would cost more monthly still, because you'd also be paying down capital: worse for cash flow today, but you'd own more of the property outright by the end of the term. Compare the two structures directly using our mortgage repayment calculator.

A positive gross yield on paper and a negative monthly cash flow in reality can exist on the same property. Always check both before you commit.

What this means for you

The £7,969 net operating income above is broadly the figure HMRC uses for taxable rental profit, because mortgage interest is no longer deducted before tax; landlords instead get a 20% tax credit under Section 24. A higher-rate taxpayer in this example would owe roughly £3,188 in tax on that £7,969 (at 40%), offset by a £1,650 credit on the £8,250 of interest paid, for a tax bill of around £1,538 in a year the property already ran a small cash loss. The maths points toward running every purchase through both calculators before you buy: if you're weighing up a property near these numbers, most people who run these numbers end up checking their actual tax position with our Section 24 tax calculator before deciding the yield is good enough.

Do not treat the cash flow figure above as your bottom line: it's pre-tax, and Section 24 is very likely to make the true return lower still.

Is this yield actually good enough, or should you look elsewhere?

There's no single "good" net yield that applies everywhere. 3.98% in a low-growth commuter town and 3.98% in a higher-growth northern city aren't the same investment once you factor in capital appreciation and the total cost of buying, including the buy-to-let stamp duty surcharge. This tool is most useful for comparing two specific properties, or the same property under different assumptions, side by side. If you're comparing several potential purchases, work through our full calculator library to stress-test each one on price, tax and financing before you make an offer.

Whilst if you're in this position (weighing up two or three properties rather than fixating on one), use the same void, fee and maintenance assumptions across all of them, or the comparison is meaningless.