What is a good rental yield for a buy-to-let property in 2026?

A good gross rental yield depends on your region. In the North West and North East, gross yields of 7-9% are achievable. In the Midlands, 5-7% is typical. In London and the South East, 4-5% is common. Whatever the gross figure, the net yield after costs is what matters. Aim for a net yield of at least 4-5% in most regions to build in a margin for voids, maintenance and management.

What is the 1% rule in property investing?

The 1% rule states that a property's monthly rent should be at least 1% of its purchase price. A £150,000 property should rent for £1,500 per month. The rule is a quick screening tool, not a substitute for full deal analysis. In higher-value areas of the UK, the 1% rule is rarely achievable. A more realistic UK benchmark is 0.5-0.8% outside London and 0.3-0.5% in the capital.

How do you calculate cash flow on a buy-to-let property?

Monthly cash flow = total monthly rent minus all monthly costs: mortgage payment, letting agent fee (typically 8-12% of rent), insurance, maintenance reserve (10% of rent), void provision (5% of rent), service charge and ground rent if leasehold, and any other running costs. A positive cash flow of £150-£300 per month per property is a healthy target. Always stress-test your cash flow at 1-2% above your actual mortgage rate.

What is cash-on-cash return and how is it calculated?

Cash-on-cash return measures the annual return on the cash you actually invested, expressed as a percentage. The formula is: annual pre-tax cash flow divided by total cash invested (deposit plus purchase costs plus refurbishment costs). If you invested £40,000 and receive £4,000 per year in cash flow, your cash-on-cash return is 10%. Most experienced UK investors target a cash-on-cash return of 8-12% for standard BTL and 15-20% for value-add or BRRR deals.

Should I use gross yield or net yield when comparing properties?

Use net yield for comparing properties you plan to hold, and gross yield for quick screening. Gross yield is annual rent divided by purchase price. Net yield subtracts all costs: mortgage interest, letting agent fees, insurance, maintenance, voids, service charges and management costs. Two properties can have the same gross yield but very different net yields depending on their cost structures. Always analyse both, but make your decision on the net figure.

Property Deal Analysis in 2026: UK Investor Guide

A property deal is not a deal until the numbers say it is. The asking price is irrelevant. The estate agent's pitch is noise. What matters is whether the rent covers the mortgage with a margin, whether the yield justifies the risk, and whether the return on the cash you put in beats the alternatives. This guide walks through the five numbers that separate a good UK property deal from a bad one in 2026, with worked examples and the exact formulas you need.

The methods here apply whether you are buying your first buy-to-let, building a portfolio, or evaluating a value-add opportunity. Use our property calculators to run your own figures as you go through this guide.

The five numbers that matter

Every property deal comes down to five calculations. Run all five before you make any offer. If even one fails your threshold, walk away or adjust your terms.

Gross rental yield — quick screen for income potential.
Net yield — the real return after all costs.
Monthly cash flow — does the property pay its way?
Cash-on-cash return — return on the cash you actually invested.
Total ROI — the full picture including capital growth.

Let us run each one with a worked example. We will use a typical terraced house in the North West: purchase price £120,000, estimated market value after light refurbishment £135,000, monthly rent £950.

1. Gross rental yield — the quick screen

Gross yield is the simplest calculation. Annual rent divided by purchase price, expressed as a percentage.

Formula: (Monthly rent × 12) / Purchase price × 100

Worked example: (950 × 12) / 120,000 × 100 = 9.5% gross yield

A 9.5% gross yield is strong by any standard. As a rule of thumb for 2026, gross yields above 8% in the North West and North East signal an income-focused deal worth investigating further. In the Midlands, 6-7% is solid. In London and the South East, 4-5% is typical for standard buy-to-let stock. If the gross yield is below 4% anywhere in the country, the deal relies entirely on capital growth to make sense, which is a bet, not an investment.

Gross yield is a screening tool. It tells you whether the property earns enough rent relative to its price to justify deeper analysis. It does not account for any of the costs that actually determine your return. That is what net yield is for.

2. Net yield — the real return

Net yield subtracts every recurring cost from the annual rent before dividing by the purchase price. This is the number that tells you what the property actually earns.

Annual costs on our example property:

Letting agent fee (10% of rent): £1,140
Buildings insurance: £250
Maintenance reserve (10% of rent): £1,140
Void provision (5% of rent): £570
Gas safety certificate: £80
EPC renewal (every 10 years): £12 per year
Management contingency: £200

Total annual costs: £3,392

Net yield formula: (Annual rent − Annual costs) / Purchase price × 100

Worked example: (11,400 − 3,392) / 120,000 × 100 = 6.7% net yield

The 9.5% gross yield drops to 6.7% after costs. That is still a healthy net yield, but the gap between gross and net matters. A property with high running costs (service charges, high management fees, expensive insurance) can have a decent gross yield and an ordinary net yield. Always calculate net before you commit.

This is a critical step in our property deal analysis framework used by seasoned portfolio landlords. A whole-of-market broker can also factor these numbers into your financing strategy when you are ready to proceed.

3. Monthly cash flow — does it pay its way?

Cash flow is the number that keeps you in the game. If the property costs more to hold each month than it earns in rent, the deal is unsustainable over time. Positive cash flow is what allows you to reinvest, build reserves and grow your portfolio.

Monthly cash flow formula: Rent − (Mortgage + Agent fee + Insurance + Maintenance + Voids + Other costs)

Assumptions for our example:

75% LTV mortgage at 4.5% on £120,000 purchase: monthly payment on £90,000 borrowed is approximately £500 (interest-only)
Monthly letting agent fee (10%): £95
Monthly maintenance reserve: £95
Monthly void provision: £47.50
Monthly insurance: £21
Other (monthlyised compliance): £24

Total monthly costs: £782.50

Monthly cash flow: 950 − 782.50 = £167.50 positive

A positive cash flow of £167 per month on a £120,000 property in the North West is realistic in 2026 with current mortgage rates. It gives you a cushion for unexpected repairs and gradual rent growth. If the same property in London cost £350,000 with £1,800 rent, the mortgage alone would be over £1,300, leaving almost nothing after costs. That is the difference a lower entry price makes to cash flow.

Stress-test every cash flow projection at 1-2% above your actual mortgage rate. If rates rise and your cash flow turns negative, you need to know before you buy. Use our deal analyser calculator to run your own stress scenarios.

4. Cash-on-cash return — the investor metric

Cash-on-cash return measures how hard your invested cash is working. It divides the annual pre-tax cash flow by the total cash you put into the deal, including deposit, stamp duty, legal fees, survey costs and refurbishment.

Total cash invested:

Deposit (25%): £30,000
Stamp duty (SDLT) at 5% surcharge: £9,000
Legal fees: £1,200
Survey: £600
Light refurbishment: £8,000

Total: £48,800

Cash-on-cash return formula: Annual pre-tax cash flow / Total cash invested × 100

Worked example: (£167.50 × 12) / £48,800 × 100 = 4.1% cash-on-cash return

A 4.1% cash-on-cash return is reasonable for a standard buy-to-let in 2026 but not exceptional. For comparison, a BRRR deal where you recycle most of your capital could show a cash-on-cash return of 15-25% because the cash invested figure is much lower relative to the income. Our complete BRRR strategy guide shows how that works with a full worked example.

Most experienced UK investors target a cash-on-cash return of 8-12% for standard buy-to-let and 15-20% for value-add deals. If yours comes in below 4%, the property is probably not worth the hassle unless you are betting heavily on capital growth.

5. Total ROI — the full picture

Total ROI adds capital growth to the cash flow picture. It answers the question: if I sell this property in five years, what was my total return on the cash I put in?

Assumptions: 2% annual capital growth over five years on a £135,000 post-refurb value.

Future value after five years: £135,000 × (1.02)^5 = approximately £149,000

Equity gain: £149,000 − £90,000 (mortgage) − £48,800 (cash invested) = £10,200

Total cash flow over five years: £167.50 × 60 = £10,050

Total return: £10,200 (equity) + £10,050 (cash flow) = £20,250

Total ROI: £20,250 / £48,800 × 100 = 41.5% over five years, or approximately 7.2% annualised

A 7.2% annualised return is solid for a buy-to-let investment in 2026. It beats the long-run average return on the FTSE 100 (around 5-6% including dividends) with the advantage of leverage and a tangible asset. But it is not a life-changing return — which is why successful investors focus on buying below market value, adding value and recycling capital through strategies like BRRR rather than relying on 2% annual growth to do the work.

For renovation-led strategies, run the numbers through our BRRR calculator to see how refurbishment affects your total ROI.

Deal analysis checklist for 2026

Before you make any offer, run through this checklist:

Gross yield ≥ 8% in northern regions, 6% in Midlands, 5% in South? If not, the deal needs strong compensating factors.
Net yield ≥ 4% after all costs? If not, the property is losing money or breaking even.
Monthly cash flow positive at your actual mortgage rate? And still positive at +2%?
Cash-on-cash return ≥ 8% for standard BTL? If not, your money may work harder elsewhere.
Purchase price at or below market value by at least 10%? If you pay full market price, the margin disappears.
Refurbishment costs verified with at least two builder quotes, not guesstimates?
EPC rating at least D with a clear path to C? See our EPC requirements guide for the 2028 deadline.
Rent verified against comparable recent lets in the same street, not the agent's estimate?

The checklist is deliberately conservative. Every deal that survives it is worth pursuing. Every deal that fails two or more criteria is a pass — there will be another one next week.

Putting it all together

The example property in the North West at £120,000 with £950 monthly rent scores reasonably well across all five metrics. It produces a 9.5% gross yield, 6.7% net yield, positive monthly cash flow of £167, a 4.1% cash-on-cash return and an annualised total ROI of around 7.2%. None of these numbers is spectacular on its own, but the combination across five metrics signals a deal worth doing.

The worst deals are the ones that look good on gross yield but crumble when you add costs, or the ones that need 5% annual growth to break even. If the numbers only work with optimistic assumptions, the deal does not work. Treat the optimistic estate agent as your adversary in the negotiation, not your source of data. Run your own figures, verify the rent, check the condition and only commit when the numbers stack up at sensible rates.

Our deal sourcing guide shows where to find the below-market-value properties that make these numbers work, and our property investment strategies walk through which approach matches your financial position and risk tolerance. The tools and calculators on this site are designed to be your deal analysis engine — use them on every deal, not just the ones that feel good.

Key takeaways

Run all five calculations (gross yield, net yield, cash flow, cash-on-cash return, total ROI) before making any offer.
Gross yield is a screen. Net yield is the real number. The gap between them reveals how much the property costs to run.
Monthly cash flow must be positive at your actual mortgage rate AND at +2% above it. Stress-test everything.
Cash-on-cash return of 8-12% is a reasonable target for standard buy-to-let. BRRR deals can deliver 15-25%.
Total ROI over five years should beat the FTSE 100 average. If it does not, question why you are in property.
Buy below market value, verify every cost with real quotes and never trust an agent's rent estimate without cross-checking actual comparable lets.
Use the D for Deals calculators to run your own deal analysis on every property you evaluate.
For financing and deal structuring, speak to a specialist whole-of-market mortgage broker who understands investment property numbers.