Rental yield calculator

How the yield calculator works

We work out the gross yield as the annual income divided by the price, expressed as a percentage. The net yield deducts the annual operating costs from the income first, then divides by the price, so it reflects what you keep after staff, utilities, business rates, insurance and marketing. The annual net income is simply the income minus those costs.

The formula is gross yield equals annual income divided by price multiplied by one hundred. Net yield equals annual income minus annual costs, divided by price, multiplied by one hundred. Leave costs at zero if you only want the gross figure.

Gross versus net on a supported living or care investment

Gross yield is the headline the seller quotes. Net yield is the figure worth acting on. On supported living let on a genuinely full repairing and insuring lease to a registered provider, the provider carries repairs and insurance, so gross and net sit close together and the lease rent does the work. The thing to check is whether the lease is actually FRI: where repairing obligations quietly sit with the landlord, or where a service charge is capped, the gap opens up and the marketed gross figure overstates what you will bank. To see how the income supports a loan, use our how much can I borrow calculator.

Worked example

A supported living house is marketed at 220,000 pounds producing 15,400 pounds of lease rent a year, a 7.00 percent gross yield. Deduct 900 pounds of costs the lease leaves with you and the net yield is 6.59 percent. Before treating that as the run rate we would check three things: the remaining lease length, whether the indexation is capped, and what the house is worth with vacant possession. If that last figure is 165,000 pounds, the yield on what you are actually secured against is a rather different number, and it is the one a lender will work from. This is illustrative only and not an offer of finance.