Gross vs Net Yield —
Why the Number Agents Show You Is Usually Wrong

There is one number that almost every property investment presentation leads with. It is usually somewhere between 7% and 10%. It is written in bold. It is the reason you are in the meeting. It is the gross yield — and it is almost never what you will actually earn.

Understanding the difference between gross and net yield is not a technical detail. It is the difference between an investment that works and one that disappoints. Yet it remains one of the most misunderstood concepts in UK property investment — partly because the industry has no particular incentive to make it clear.

What is Gross Yield?

Gross yield is a simple calculation. Annual rent divided by purchase price. A property bought for £200,000 that rents for £1,000 per month generates £12,000 per year. £12,000 divided by £200,000 = 6% gross yield. No costs deducted. No mortgage payments. No voids. No repairs. Just rent divided by price. The number sounds good. It tells you almost nothing about what you will actually earn.

What Costs Actually Reduce Your Return?

• Management fees — typically 10-15% of monthly rent for a managed property
• Void periods — industry average 4-6 weeks per year where no rent is received
• Maintenance and repairs — a realistic provision of 8-10% of annual rent
• Insurance — typically £500-800 per year
• Service charge and ground rent — relevant for leasehold flats, can be significant
• Accountancy — typically £500-750 per year

Why Does the Industry Focus on Gross?

Gross yield is bigger. It is easier to calculate. And the companies selling investment properties benefit from leading with the more impressive number. This is not necessarily dishonest — gross yield is a legitimate comparison metric. But it is incomplete, and presenting it as the headline return without context is misleading. Your job as an investor is to ask for the full picture.

HMOs — Where the Gap Works in Reverse

The one scenario where gross versus net analysis becomes more favourable to the investor is the HMO. Total room income is significantly higher than a single let. Gross yields of 15-20% on total room income versus purchase price are achievable in good locations. Yes, management costs are higher and licensing fees apply. But even after all costs, net HMO yields of 10-14% are achievable in cities like Manchester, Liverpool and Leeds.