You bought at a 6% yield. So why does the account never seem to hold anything close to 6%?
The gap is running costs, and most online calculators quietly skip them. They divide annual rent by purchase price, print a tidy gross figure, and stop. Every pound of that gross number then gets chipped away by the ordinary, unavoidable cost of keeping a property let. This piece itemises those costs and shows, in pounds, how much yield they really drag off a typical deal.
Gross yield is a headline, not a take-home
Gross yield is annual rent divided by the price (or current value): a £200,000 house let at £1,000 a month is 12,000 / 200,000, or 6%. It is useful for comparing properties on the same basis and nothing more. It assumes the tenant never leaves, the boiler never fails, and no agent, insurer or council ever sends an invoice.
Net yield is the honest cousin. It is the rent left after operating costs, divided by the price. The distance between the two is the drag, and on a real portfolio it is rarely small.
The running costs a gross figure ignores
Here are the recurring line items that sit between gross rent and what you actually keep. Not all apply to every property, but most landlords face the majority of them.
- Letting and management. Full management typically runs 10% to 15% of rent including VAT. Even a tenant-find-only service costs a flat fee every time you re-let.
- Voids. Empty weeks between tenancies, plus any relet marketing gap. Budget a realistic allowance rather than assuming zero.
- Repairs and maintenance. The daily grind of the job: broken taps, worn seals, a contractor call-out. A common planning rule is around 1% of property value a year, more on older stock.
- Landlord insurance. Buildings cover plus property owners' liability, and often rent guarantee or emergency cover on top.
- Compliance and safety. Annual gas safety check (CP12), an EICR every five years, EPC every ten, plus smoke and carbon monoxide alarms. See gov.uk landlord responsibilities for what is mandatory.
- Leasehold charges. If it is a flat, service charge and ground rent can dwarf everything else on this list.
- Admin and professional fees. Accountant, referencing, deposit protection, the odd bit of legal advice.
A worked example: the drag in pounds
Take that £200,000 freehold house let at £1,000 a month (£12,000 a year, 6% gross). Here is a plausible annual cost stack for a single let.
| Cost line | Annual figure |
|---|---|
| Letting agent, full management (12% inc VAT) | £1,440 |
| Void allowance (about two weeks) | £460 |
| Repairs and maintenance (0.5% of value) | £1,000 |
| Landlord insurance | £300 |
| Gas safety + EICR (annualised) | £110 |
| EPC, alarms, sundries | £90 |
| Total operating costs | £3,400 |
Net operating income is £12,000 minus £3,400, or £8,600. Net yield is 8,600 / 200,000, which is 4.3%.
So the "6% property" is a 4.3% property once you keep it running. That 1.7 percentage-point drag means roughly 28% of the gross rent never reaches you. And this example is deliberately kind: repairs at 0.5% of value, only two void weeks, and no big one-off jobs.
Leasehold quietly rewrites the maths
Swap the freehold house for a leasehold flat with a £1,200 service charge and £250 ground rent, and you add £1,450 of cost before a single repair. Operating costs rise to £4,850, net income falls to £7,150, and net yield drops to 3.58%. Same rent, same price, very different reality. Always read the service charge history before you buy a flat, because it tends to rise faster than rent.
Lumpy costs need a sinking fund, not a fright
The trap with maintenance is that it arrives in lumps. A £2,500 boiler replacement in year eight can wipe out a year of profit if you have not been setting money aside. The fix is to annualise: a boiler that lasts roughly 12 years is about £210 a year of cost whether or not it fails this year. Do the same for a re-carpet, a redecoration and a new bathroom, and hold that money in a separate pot. Your net yield stops lurching from year to year and starts telling the truth.
What is changing in 2026 and why it matters for costs
Two shifts are worth pricing in now.
The Renters' Rights Act 2025 received Royal Assent on 27 October 2025, and the main tenancy reforms commenced on 1 May 2026, when Section 21 "no fault" evictions were abolished and all tenancies became periodic (pre-1-May-2026 Section 21 notices remain enforceable in court only until 31 July 2026). Periodic tenancies with no fixed end can mean tenants leave with less notice, so a slightly larger void allowance is prudent while the market settles. See the NRLA's Renters' Rights Act guidance for the detail.
On energy, the proposed minimum EPC band C would apply to new tenancies by 2028 and all tenancies by 2030 (still proposed, so confirm the final rules). If your property sits at D or E, budget for upgrade works as a future capital cost, not a surprise. The current standard and its exemptions are on gov.uk's MEES guidance. Both dates are current at the time of writing on 1 July 2026, so check for updates before you rely on them.
From net yield to actual cash in hand
Net yield is a property-level measure and, by convention, ignores your mortgage. Cash flow does not. Once you subtract mortgage interest, the picture tightens again, and after Section 24 (which restricts mortgage-interest relief for individuals to a 20% basic-rate tax credit, while companies still deduct interest in full) the tax treatment can change which structure wins.
Rather than juggle all of this on paper, drop your figures into the buy-to-let cashflow calculator: rent, each running cost, void allowance and mortgage, and read the monthly cash flow and net yield straight out. It is the fastest way to see whether a "6% deal" survives contact with its own costs.
The habit worth keeping is simple. Never judge a purchase on gross yield alone. Itemise the running costs, annualise the lumpy ones, and compare properties on net yield. A lower gross figure with light costs often beats a flashy one that bleeds.
This is general information, not tax or financial advice.
