Purseglove Table Purseglove Table

Investment Spotlight: Gross Yield Trends in the UK

If you’re thinking about investing in property in the UK, understanding gross yield trends for different UK regions, cities and postcodes is essential. It can help you to pinpoint potential investment areas and safeguard your investment for years to come!

Purseglove House Purseglove House

What is gross yield and why is it important?

When people refer to the yield of a rental property, they generally mean the gross rental yield. It’s calculated by dividing the gross annual rental income by the property purchase price and multiplying by 100 to get a percentage figure. 

For example, if you purchased a property for £180,000 that rents for £750 per calendar month it will generate a gross rental income of £9,000 in a year. Divide the £9,000 by the £180,000 to get 0.05 and multiply this by 100 to calculate the gross yield: 5%. 

Gross yield is great for helping to narrow down specific areas to invest in because you can easily see how one region, city or postcode compares to another. However, you shouldn’t purchase an investment property based on gross yield alone; there are other things to consider!

Property investment metrics beyond gross yield

While gross yield is a useful metric for comparing regions, cities and postcodes more generally, it’s quite simplistic and shouldn’t be the sole factor in your investment decision. This is because rental properties also have operational costs which must be considered for a more accurate assessment of ROI.

For example, if you compare two leasehold apartments that both generate £750 pcm and were both purchased for £180,000, their gross yield is the same. However, since these properties are leasehold, they both have yearly ground rent charges. If the ground rent for one apartment is £25 pcm and the other is £125 pcm, the net yield is 4.17% for one and 4.83% for the other – and this only takes into account one operational cost!

That’s why you should always consider gross yield alongside all of the property’s operational and up front costs.

  • Stamp duty
  • Service charges
  • Ground rent
  • Insurance premiums
  • Agent fees
  • Void periods
  • Refurbishment costs 
  • Maintenance costs

You can use gross yield to pinpoint investment areas that suit your budget and goals, but should apply increasingly more detailed due diligence as you narrow down your search. Gross yield should become net yield, and then ROI, and finally ROCI (return on cash investment). ROCI is a far better metric for analysing a deal because it takes the annual net profit (pre tax) and divides it by the actual cash invested in a deal (multiplied by 100) to give you a percentage.

Download our FREE Deal Analysis Spreadsheet

Streamline your due diligence and quickly evaluate your next property deal for better investment decisions

Working on a laptop Working on a laptop

Find out more about our services

Our end-to-end property investment and management services mean you can enjoy an assured stream of income, hands-free!

From initial consultation and property refurbishment through to 100% hands-free property management, your portfolio will receive all of the attention it deserves with Purseglove, so that you can reap the benefits (and ditch the stress)!

Get In Touch

Contact us if you have any questions or want to know more about our services or the properties we manage. We're always here to help!

Learn More