Work out the gross yield, the net yield and what you would actually be left with each month on a buy to let. It is free to use and you are not asked for anything before you see the numbers.
Most yield calculators stop at the gross figure. Ours carries on to whether the rent covers what a lender needs to see before they will hand over the mortgage.
Your property
Put your figures in and the numbers appear. Nothing is sent anywhere.
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We will email you a link to your PDF, and one of our buy to let specialists will take a look at your figures.
We will only use these details to send you your figures and to talk to you about the borrowing. Clever Lending is authorised and regulated by the Financial Conduct Authority.
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For illustration only. Figures are estimates based on what you have entered and are not a quote, an offer of finance or tax advice. Lender criteria, valuations and your own tax position will affect the outcome. Clever Lending is authorised and regulated by the Financial Conduct Authority (FRN 795789).
There are two figures and people mix them up constantly.
Annual rent ÷ purchase price × 100
£10,800 ÷ £150,000 = 7.2%
A £150,000 property let at £900 a month.
(Annual rent − running costs) ÷ purchase price × 100
£8,100 ÷ £150,000 = 5.4%
The same property after £2,700 a year of costs.
Net is the honest number. It is also the one nobody quotes in an estate agent’s listing, which is worth remembering when a property is advertised as yielding eight per cent.
Yields vary enormously by region and by property type, but these are the bands lenders and landlords tend to work to.
| Gross yield | What it usually means |
|---|---|
| Under 4% | Typically higher-value areas where the return comes from capital growth rather than rent. Often loss-making month to month once a mortgage is on it |
| 4 to 6% | Common across much of England. Workable, but leaves little room for rate rises or long voids |
| 6 to 8% | The range most landlords and lenders are comfortable with. Enough headroom to absorb a bad year |
| Above 8% | Often multi-lets, HMOs or lower-value stock. Worth asking why it is that high before you assume it is a bargain |
A high yield is not automatically a good investment. Cheaper properties often carry higher maintenance, longer voids and harder-to-place tenants, and some lenders are wary of very low property values. A 9 per cent yield on a flat nobody will lend against is worth less than a 6 per cent yield on one they will.
Gross yield ignores every one of these. Net yield is what is left once they are paid.
| Cost | Typical allowance | Notes |
|---|---|---|
| Letting agent | 8 to 12% of rent | More if you want full management rather than tenant find |
| Void periods | One month a year | Optimists budget nothing here and regret it |
| Maintenance and repairs | 10% of rent | Older properties need more, not less |
| Landlord insurance | £150 to £400 a year | Buildings cover, plus liability |
| Ground rent and service charge | Varies | Flats only, and it can be substantial |
| Safety certificates | £150 to £300 a year | Gas safety, electrical checks, EPC |
| Compliance and licensing | Varies | Selective licensing applies in a lot of areas now |
| Mortgage interest | The largest by far | Not deductible as an expense for individual landlords |
As a rough working figure, allow around 25 to 30 per cent of the rent for agent fees, maintenance, insurance, safety certificates and a void allowance, before the mortgage. Flats add ground rent and service charge on top, which can be a large number and is easy to overlook when you are working from a listing.
Mortgage interest is the largest cost on the list by a distance, and it is the one that works differently to all the others. Since the phasing out of mortgage interest relief, individual landlords cannot deduct it as an expense. You get a basic rate tax credit instead, which means higher rate taxpayers can be taxed on rental income they never actually saw.
It is the single biggest reason so many landlords now buy through a limited company, where interest is still a deductible business expense. That is not automatically the better route. There are running costs, lenders price company lending differently, and moving property you already own into a company can trigger stamp duty and capital gains.
It is worth taking proper tax advice on your own position before you buy rather than after. We are mortgage brokers rather than tax advisers, but we will tell you plainly how the lending differs between the two.
Yield is calculated against the full purchase price, so it treats a cash buy and a mortgaged buy as identical. They are nothing alike. Here is the same £150,000 property, three ways.
Rent against the purchase price. The figure agents quote.
After the letting agent, insurance, maintenance and voids.
After the mortgage, on the £48,500 you actually put in.
Buy it with a 75 per cent mortgage at 5.5 per cent interest only and you are paying around £516 a month in interest. After £225 a month of running costs you are left with roughly £159 a month, or about £1,900 a year.
Now look at what you actually put in: a £37,500 deposit, somewhere around £9,000 in stamp duty and £2,000 in fees and legals, so about £48,500 of your own money. That £1,900 a year is a return of just under 4 per cent on the cash you invested, before tax and before any capital growth.
That is three different numbers off the same property and the same rent, and the one an agent quotes you is the flattering one. The calculator shows all three, so you can see how a deal behaves rather than how it advertises.
Here is where a lot of buy to let purchases come unstuck, and it is the bit a general yield calculator has no way of telling you. Lenders do not simply check that the rent exceeds the mortgage payment. They apply an interest cover ratio, which means the rent has to cover the interest by a set margin at a stressed rate that is usually higher than the rate you will actually pay.
| Borrower type | Typical interest cover ratio |
|---|---|
| Basic rate taxpayer | 125% |
| Higher or additional rate taxpayer | 145% |
| Limited company (SPV) | 125% |
| Five year fixed rate | Often assessed at a lower stress rate, which increases what you can borrow |
On our example, £112,500 at a stressed 5.5 per cent is about £516 a month of interest. A higher rate taxpayer needs the rent to cover 145 per cent of that, so around £748 a month. The property lets at £900, so it passes comfortably.
Change the numbers and it stops passing. That is why so many applications fall over at the last minute: the yield looked fine, but the rent would not stretch to the lender’s stress test. Running it before you offer is far better than finding out after you have paid for a survey.
Longer fixed rates are the usual way round a tight case, because a five year fix is often stress tested at a lower rate, which can lift the maximum loan considerably.
Seven figures and the numbers appear. Here is what each one means.
| Field | What to enter |
|---|---|
| Purchase price | What you are paying, or the current value if you already own it |
| Monthly rent | A realistic local figure. Ask a letting agent rather than guessing |
| Deposit | Your actual cash contribution, usually 25% or more on a buy to let |
| Mortgage rate | A working figure if you do not have a quote. Ask us for live pricing |
| Repayment type | Most buy to let is interest only. Repayment costs more monthly but clears the debt |
| Annual running costs | Agent, insurance, maintenance, safety checks, service charge and a void allowance |
| Purchase costs | Stamp duty including the additional property surcharge, legals and survey |
| Your tax position | Drives the interest cover ratio the lender applies, so it changes the stress test |
Then look at the net yield and the return on cash together. If the net yield works but the return on cash is thin, the deal is probably over-leveraged. If both work but the stress test fails, the answer is usually a different lender or a longer fix rather than a different property.
We are a specialist property finance brokerage, authorised and regulated by the Financial Conduct Authority. We arrange buy to let mortgages every day, from single lets through to HMOs, multi-unit blocks and portfolios held in limited companies.
Buy to let has turned into a specialist market. One lender will stress test a case and turn it down, another will look at the same figures on a five year fix and lend comfortably. They also take very different views on limited companies, HMOs, student lets and first-time landlords. Knowing who does what is most of the job, and we work with lenders that are not available to every broker.
Send us the property and the rent and we will come back within 24 business hours with what is achievable. There are no fees payable until we have found you a solution, and you will always speak to an adviser rather than a triage team.
If you are buying at auction or need to move before a buy to let mortgage can be arranged, bridging finance is often the way in. For mixed use property or a larger portfolio, look at commercial mortgages. You can see everything we arrange on our borrower finance options page.
Send us the property and the rent and we will come back within 24 business hours with what is achievable. No fees payable until we have found you a solution, and you will always speak to an adviser rather than a triage team.
Gross yield is the annual rent divided by the property value, multiplied by 100. Net yield does the same after taking off your running costs. On a £150,000 property let at £900 a month, gross is 7.2 per cent and net is around 5.4 per cent once agent fees, insurance and maintenance come out.
Most landlords look for somewhere between 6 and 8 per cent gross, which leaves enough headroom to absorb a void or a rate rise. Below 4 per cent you are usually relying on capital growth rather than income. Above 8 per cent, it is worth understanding why the yield is that high before assuming it is a bargain.
It is driven by the rent rather than your salary. Lenders apply an interest cover ratio, typically 125 per cent for a basic rate taxpayer or limited company and 145 per cent for a higher rate taxpayer, at a stressed interest rate. Most also cap you at 75 to 80 per cent of the property value. The calculator above shows whether your rent clears that hurdle.
It is the margin by which the rent has to cover the mortgage interest at a stressed rate. At 145 per cent, a mortgage costing £516 a month at the stress rate needs rent of about £748. It is the most common reason a buy to let application fails, and it is worth checking before you offer rather than after.
Often yes. Lenders will usually stress test a five year fix at a lower rate than a two year deal, sometimes at the pay rate itself, which can lift the maximum loan considerably. If a case is tight on affordability, moving to a longer fix is the first thing we look at.
A lot of landlords now do, because a company can still deduct mortgage interest as a business expense while individual landlords only get a basic rate tax credit. It is not automatically better though. There are running costs, and moving existing property into a company can trigger stamp duty and capital gains. Take tax advice on your own position before deciding.
No, and this is the most common misunderstanding. Yield is measured against the whole property value regardless of how you paid for it, so it looks identical whether you bought in cash or with a 75 per cent mortgage. Return on the cash you actually invested is the figure that tells you how the deal performs, and our calculator shows both.
As a rough working figure, allow around 25 to 30 per cent of the rent for agent fees, maintenance, insurance, safety certificates and a void allowance, before the mortgage. Flats add ground rent and service charge on top, which can be a large number and is easy to overlook when you are working from a listing.
Yes, though the pool of lenders is smaller and some want you to be an existing homeowner or to meet a minimum income. First-time landlord and first-time buyer together is harder again but not impossible. It is a case where the right lender matters more than the headline rate.
The yield maths is the same, but the costs and the lending are not. HMOs carry higher running costs, licensing and often room-by-room voids, while holiday lets have seasonal income that lenders assess differently again. Use the calculator for a first look, then talk to us before you rely on it.
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