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 operating costs from the income first, then divides by the price, so it reflects what you keep after staff, utilities, business rates, insurance and marketing. 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 a supported living or care investment

Gross yield is the headline most agents quote. On a care home net yield is the honest figure, because it is a trading business and the operating costs come out of your income rather than a tenant's, and the net figure is effectively the net operating income, or EBITDARM, that a lender will use to size a loan. On supported living let on a full repairing and insuring lease to a registered provider, the provider carries more of the cost, so gross and net sit closer together and the lease rent does the work. To see how the income supports a loan, use our how much can I borrow calculator.

Worked example

On a 1 million pound care home producing 75,000 pounds of income a year, the gross yield is 7.50 percent. Deduct 8,000 pounds of operating 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 occupancy and fee mix behind it, or on a supported living asset the remaining lease length and indexation. This is illustrative only and not an offer of finance.