ROI vs Yield Explained
Almost every yield you'll be quoted is gross. It's the least useful number in property, and it's the one printed on the listing.
Yield measures rent against the property’s price. ROI (Return on Investment) measures profit against the cash you actually put in. Gross yield ignores every cost, net yield deducts running costs, ROI deducts the mortgage too and divides by your real capital, and total return adds capital growth. Four numbers, four answers, one property.
Here’s why it matters. 55 Hunt Lane in Bentley, Doncaster, was bought for £61,500 and lets at £650 a month. That’s a 12.7% gross yield, which is the figure anybody selling it would print. Finish the arithmetic and the return on the money actually deployed is 7.2%. Both numbers are true. Only one of them is useful.
The four numbers, side by side
| Measure | What it divides | What it tells you | Hunt Lane |
|---|---|---|---|
| Gross yield | Annual rent by purchase price | Whether a property is worth a second look | 12.7% |
| Net yield | Rent after running costs, by purchase price | What the asset produces before financing | 7.9% |
| ROI | Cash profit after everything, by cash invested | What your money is earning | 7.2% |
| Total return | ROI plus capital growth on the whole asset | What you’re actually building | ROI plus growth |
Use gross to screen and nothing else. Use ROI to decide. Use total return to choose the area, which is the decision that ends up mattering most and gets the least attention.
Gross yield: the screening tool
Gross yield is annual rent divided by purchase price, times 100. Hunt Lane: £650 a month is £7,800 a year, divided by £61,500, is 12.7%.
It’s not a lie. It’s just a filter. It deducts nothing: no management, no maintenance, no insurance, no voids, no mortgage interest, no stamp duty, no legals. It also ignores the condition of the roof and whether anybody wants to live on that street.
Gross yield is genuinely useful for one thing, which is comparing a hundred listings quickly so you know which five to look at properly. Across Bullseye’s markets, Doncaster and Worksop routinely screen at 8 to 10% gross at entry prices from £70,000, while Sheffield screens at 6 to 7% at £95,000 to £140,000. That comparison is worth making. What it isn’t is a reason to buy the Doncaster house, and the reason why is further down this page.
A high gross yield is a price, not a prize. The market is charging less for that property because something about it is worse, and the extra points are what buyers demanded before they’d accept it. That argument is set out at length in why a 7% yield isn’t worth the risk without security.
Net yield: what the asset actually produces
Net yield deducts the costs of running the property, then divides by the purchase price. It’s the first honest number in the sequence.
Here’s Hunt Lane finished properly. Every figure is an illustration of the shape of the calculation, not a quote.
| Line | Annual |
|---|---|
| Rent received | £7,800 |
| Letting agent management, 10% plus VAT | (£936) |
| Buildings insurance | (£300) |
| Repairs and maintenance allowance | (£900) |
| Safety certificates, annualised | (£150) |
| Void allowance, one month | (£650) |
| Net rent | £4,864 |
£4,864 divided by £61,500 is a 7.9% net yield. The gross figure lost 4.8 percentage points to costs that were always going to happen.
The void allowance is the line people delete. Don’t. A month empty costs you a twelfth of the rent plus council tax, which falls on the owner when a property is unoccupied. Two months empty a year in a thin rental market turns that 7.9% into 6.8% on its own.
ROI: the number that decides
ROI divides your annual profit by the cash you actually invested, not by the purchase price. That distinction is the whole point, because you never invest exactly the purchase price. You invest more, or with a mortgage, considerably less.
Hunt Lane was bought for an overseas investor, in cash.
| Cash in | |
|---|---|
| Purchase price | £61,500 |
| Stamp duty, 5% additional property surcharge | £3,075 |
| Non-UK resident surcharge, a further 2% | £1,230 |
| Conveyancing, searches and disbursements | £1,500 |
| Survey | £600 |
| Total capital deployed | £67,905 |
£4,864 divided by £67,905 is 7.2%. Add a sourcing fee, which I haven’t included because it depends on the type of purchase and you get it in writing before any work starts, and it comes down slightly further.
Stamp duty rates were checked on GOV.UK on 25 August 2026. The higher rates for additional dwellings, effective 1 April 2025, run 5% up to £125,000, 7% from £125,001 to £250,000 and 10% from £250,001 to £925,000, and they apply to purchases of £40,000 or more. The 2% non-UK resident surcharge has applied since 1 April 2021 and sits on top. How any of it applies to you depends on your circumstances, so confirm it with your solicitor rather than with me.
So the ladder on one real property runs 12.7%, then 7.9%, then 7.2%. Nothing dishonest happened between those numbers. Somebody just finished the sum.
What a mortgage does to ROI
Borrowing changes the answer, in both directions. Take 23 Beech Grove, bought at £90,000 against a £125,000 original asking price, letting at £850 a month. With a 25% deposit at 5.5% interest only, the cash in is about £38,400 including stamp duty, legals, survey, fees and a £6,000 refurbishment, and the net cashflow after interest is around £3,015. That’s a 7.9% ROI on £38,400 rather than 7.5% net yield on £90,000.
Leverage lifted it because the asset yields more than the debt costs. Reverse that, with rates above the net yield, and the same mechanism works against you just as efficiently. Stress test at the current rate plus 1.5 to 2%. At 7.5% interest the Beech Grove cashflow falls to roughly £1,665 and the ROI to 4.3%. If it doesn’t survive that, the margin isn’t there.
Total return: the number nobody quotes
Total return is ROI plus capital growth on the whole property, and over a long hold it usually dwarfs the income.
Beech Grove at 4% growth gains £3,600 in a year on a £90,000 asset. Against £38,400 of cash that’s another 9.4%, so a 7.9% cash ROI becomes roughly 17.3% total. Name the downside first though: a 4% fall is minus 9.4% on your cash, because leverage magnifies losses with exactly the same efficiency.
Now the trade-off that actually decides where you buy. The highest yielding streets in South Yorkshire are often the highest crime streets, and House Price Index growth there tends to run near 1% a year. The areas Bullseye targets produce lower income and steadier growth. On a £115,000 property:
| 8% ROI, 1% growth | 6% ROI, 5% growth | Difference | |
|---|---|---|---|
| Year 5 | £23,866 | £40,772 | £16,906 |
| Year 10 | £48,032 | £90,323 | £42,291 |
| Year 15 | £72,511 | £151,077 | £78,565 |
| Year 20 | £97,322 | £226,129 | £128,807 |
Over twenty years the higher yielding option pays out £36,000 more in cashflow and gives up £164,807 in capital. Growth is a historical pattern and not a promise, which is why I won’t guarantee it. But if you optimise purely on yield you’re optimising the smaller half of the return.
Which of those two suits you depends entirely on whether you need income now or wealth later. That’s covered in cashflow priority vs wealth preservation.
What’s a good ROI on a UK buy to let?
Bullseye’s working target is 7 to 8% net ROI after full costs, on properties between £80,000 and £140,000, with expected growth of 4 to 6% a year in the areas selected. Anything projecting 12% net deserves a hard look at the void assumption and the exit.
The floor is easier to define than the ceiling. If £50,000 of your capital is producing £1,000 a year, that’s 2%, and a cash ISA beats it without a boiler attached. That isn’t an investment.
Does ROI account for tax?
No, and that’s the last gap between these figures and your bank balance. Everything above is pre-tax.
For individual landlords, mortgage interest is no longer deducted from rental profit. Instead the tax liability is reduced by a basic rate tax reduction, currently 20% of the finance costs, fully in force since 6 April 2020. Checked on GOV.UK on 25 August 2026. That treatment differs for companies, and whether personal or company ownership suits you is a question for an accountant, not for a sourcer. There’s background on the choice in UK company vs personal ownership.
What this means for you
When somebody quotes you a yield, ask two questions: is that gross or net, and what’s been deducted to get from one to the other. Then ask for the ROI on cash invested, with the stamp duty and the buying costs in it. If they can’t produce that in a table, they haven’t done the work.
Build your own version using how to calculate ROI on a buy to let, and get the full cost stack from what costs are involved in buying an investment property.
Connor, Bullseye Properties Ltd