Gross vs Net Yield: The Real Profit Measure

Why Yield Isn’t Just a Number

When investors talk about property performance, “yield” is usually the first word mentioned. You’ll see it on listings, in mortgage criteria, and even in social media posts claiming “10% returns!”

But not all yields are equal. The figure you see advertised is often gross yield — a simplified calculation that ignores the real-world costs of running a property. The number that truly matters is net yield — the return after all expenses are deducted.

At Genius Academy, we teach investors to look beyond shiny percentages. Because profit isn’t what you earn—it’s what you keep.

Why Yield Matters for Investors

Yield measures how efficiently a property generates income relative to its purchase price. It helps investors:

• Compare different deals quickly.

• Assess whether rental income supports mortgage payments.

• Evaluate the long-term sustainability of a portfolio.

But to make informed decisions, you must understand which yield you’re looking at — and what’s missing from the calculation.

Understanding Gross Yield

Gross yield is the simplest formula:

Gross Yield (%) = (Annual Rent ÷ Property Price) × 100

Example: You buy a flat for £200,000 and rent it for £1,200 per month (£14,400 per year).

Gross Yield = (14,400 ÷ 200,000) × 100 = 7.2%

It gives a quick snapshot — useful for comparing properties — but it assumes no costs, which is never realistic.

Why Gross Yield Can Mislead You

Gross yield ignores every ongoing cost that eats into your returns:

• Mortgage interest or finance costs

• Maintenance and repairs

• Letting or management fees

• Service charges and ground rent

• Insurance

• Periods of vacancy

Two properties with the same gross yield can have very different profits once those costs are accounted for.

Introducing Net Yield—The Real Profit Measure

Net yield shows your true return after expenses:

Net Yield (%) = ((Annual Rent – Annual Costs) ÷ Property Price) × 100

Let’s revisit the example:

• Annual Rent: £14,400

• Annual Costs: £3,400 (mortgage interest, insurance, management, maintenance)

• Net Income: £11,000

• Purchase Price: £200,000

Net Yield = (11,000 ÷ 200,000) × 100 = 5.5%

That 1.7% difference represents real money—£3,400 per year in this case— which directly affects your cash flow and growth potential.

Real-World Comparison

Property	Purchase Price	Rent (pcm)	Gross Yield	Net Yield
City Centre Flat	£250,000	£1,400	6.7%	4.8%
Suburban Terrace	£180,000	£1,100	7.3%	5.9%
Student HMO	£300,000	£2,400	9.6%	6.5%

The HMO looks best on paper, but its maintenance and management costs are far higher. The suburban terrace—with modest rent and lower running costs—may actually deliver more consistent profits.

When to Use Each Yield

• Use gross yield for quick screening of potential deals.

• Use net yield for more profound analysis and comparing real profitability.

Once you’ve shortlisted properties, always calculate net yield before committing funds. It’s the version lenders and experienced investors rely on to measure long-term performance.

Profit Is in the Details

A strong investment isn’t about chasing the highest percentage — it’s about understanding what’s behind the number.

Gross yield helps you identify opportunities, but net yield reveals the truth. By focusing on net yield, you’ll make smarter decisions, avoid cash flow surprises, and build a portfolio that’s genuinely profitable — not just impressive on paper.

At Genius Academy, we teach that the best investors aren’t the ones who buy the most—they’re the ones who analyse the most.