Glossary
Net yield
Annual rent after running costs, as a percentage of the total cost to buy.
What it means
Net yield takes the running costs off the rent (letting fees, maintenance, insurance, voids, service charge and ground rent) and divides what is left by the full cost of buying, including stamp duty and legal fees. It does not include mortgage interest, so it tells you how good the property is, not how good the finance is.
Worked example
ExampleThe same £120,000 terrace, let at £9,600 a year, as an additional property in England.
- Running costs
- £2,400 a year
- Net rent
- £9,600 − £2,400 = £7,200
- Cost to buy
- £120,000 + £6,000 SDLT + £2,000 fees = £128,000
- Net yield
- £7,200 ÷ £128,000 = 5.6%
The 8.0% gross becomes 5.6% net. That is the figure to compare against other investments.
Information, not advice. Example figures are fictional and for illustration only.