Gross vs net yield: what the numbers really tell you

“It yields 9%.” It’s the line every listing wants you to remember — and on its own it tells you almost nothing. Understanding the gap between a gross yield and what actually lands in your account is the single most useful skill in property investment.

Gross yield: the headline

Gross yield is simply the annual rent divided by the purchase price. A £200,000 property renting at £1,200 a month produces £14,400 a year, or a 7.2% gross yield. It’s a quick way to compare properties — but it ignores every cost of actually owning one.

Net yield: the number that matters

Net yield takes the annual rent, subtracts your running costs, and divides by what you actually invested — including refurbishment and buying costs, not just the price. That single change usually knocks a couple of points off the headline, and occasionally reveals that a “high-yielding” deal barely washes its face.

The costs that eat into a gross figure include:

• Letting and management fees
• Insurance and safety certificates
• Maintenance and repairs
• Void periods when a room or unit is empty
• For HMOs: bills, licensing and furnishing

Rule of thumb: the more hands-on the strategy, the wider the gap between its gross and net yield.

Realistic ranges by strategy

These are broad, indicative ranges — every deal is different, and the point is the shape, not precise numbers:

• Buy-to-let: lower gross (often ~5–6%), but simple, with a smaller gross-to-net gap.
• HMO: higher gross (often ~8–12%), but more costs and management sit behind it.
• Commercial property: fully managed for you, with income resting on one business tenant rather than a pool of renters.
• Assisted living: typically lower headline, but often long lease and genuinely hands-off.

Why headline yields mislead

A property marketed on gross yield alone is asking you to do the hard part yourself. Sometimes the net figure is still excellent. Sometimes the refurb, the voids or the management cost turns a 9% headline into a 4% reality. The only way to know is to model it properly before you commit.