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 costs from the income first, then divides by the price, so it reflects what you keep after voids, repairs, insurance, management and any service charge shortfall. 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 an industrial investment

Gross yield is the headline most agents quote, but net yield is the honest figure, especially on a multi-let industrial estate where voids, management and common parts come out of your income rather than a tenant's. Industrial rents are usually quoted per square foot, so a 15,000 square foot estate at 5 pounds per square foot produces 75,000 pounds a year when fully let. The net figure is effectively the net rent that a lender will use to size a loan, so it does double duty in your appraisal. A single unit let on full repairing and insuring terms loses far less between gross and net than a multi-let estate carrying empty units. To see how the income supports a loan, use our how much can I borrow calculator.

Worked example

On a 1 million pound multi-let industrial estate producing 75,000 pounds of rent a year, the gross yield is 7.50 percent. Deduct 8,000 pounds of landlord costs and the annual net income is 67,000 pounds, giving a net yield of 6.70 percent. Before treating that as the run rate, we would check the tenancy schedule behind it, the unexpired lease terms and whether the passing rents sit at, above or below market levels per square foot.