Insights Portfolio Strategy Property Optimisation

What Is Rental Yield and Why It Matters for Landlords

Barbara Bober 18/01/2026

Time to read: 3 minutes.

Rental yield is one of the simplest ways to understand how well a rental property performs. It shows how much income a property generates compared to its price. While it’s not the only number that matters, it’s often the first check landlords use to decide whether a property is worth a closer look.

What rental yield really means

At its core, rental yield answers one question:

“How hard is this property working for my money?”

If two properties cost the same but one produces more rent, it has a higher yield. That doesn’t automatically make it a better investment, but it does mean it generates more income relative to its price.

There are two common ways to look at yield:

Gross yield looks only at rent and property price
Net yield takes costs into account, such as management fees and running expenses

Both views are useful. Gross yield is quick and simple. Net yield is closer to real life.

Why rental yield matters

Rental yield helps you make better decisions, especially early on.

It allows you to:

Compare different properties quickly
Sense-check asking prices
Understand whether the rent realistically supports the investment
Avoid deals that look good on the surface but struggle once costs are included

A high purchase price with low rent usually means low yield. A lower price with strong rent usually improves yield. Seeing this clearly can stop you from overpaying.

Yield vs cashflow: not the same thing

Rental yield and cashflow are related, but they are not the same.

Yield focuses on return relative to price
Cashflow focuses on money in vs money out each month

A property can have a decent yield but poor cashflow if mortgage interest or costs are high. It can also have modest yield but strong cashflow if bought well or financed conservatively.

That’s why it’s important to look at both, not just one number in isolation.

Costs make a big difference

Real-world rental income is affected by more than just rent.

Things that reduce income include:

Periods without a tenant
Letting or management fees
Repairs, insurance, certificates, and service charges
Mortgage interest (if applicable)

Ignoring these can give a false sense of security. Even small costs add up over a year.

How to use rental yield properly

Rental yield works best as a comparison tool, not a final verdict.

Use it to:

Compare similar properties in the same area
Test different rent and cost assumptions
Understand how sensitive a deal is to changes

Then combine it with cashflow, risk, long-term plans, and how much involvement you want as a landlord.

A simple next step

If you’re reviewing a deal or checking an existing property, use the Rental Yield Calculator to run a few scenarios. Adjust rent, costs, and occupancy to see how the numbers change. This gives you a clearer picture before making decisions.

Rental yield won’t tell you everything, but it’s a solid place to start.