A property advertised at "6% yield" and a property advertised at "6% yield" can produce completely different amounts of cash in your pocket. Here's a worked example showing exactly where the gap comes from -- and why gross yield alone is never enough to compare two deals.
The Worked Example
Take a £180,000 property let at £900/month (£10,800/year). Gross yield: £10,800 divided by £180,000 = 6.0%.
Now apply real costs, using typical figures for an agent-managed setup:
- Letting agent fee (if not self-managing): 10-15% plus VAT of rent -- say 12% plus VAT, roughly £1,555/year
- Void periods: industry rule of thumb is 2-4 weeks/year unoccupied -- at 3 weeks, that's roughly £623 in lost rent
- Maintenance and repairs reserve: a common planning figure is ~1% of property value/year -- £1,800
- Buildings insurance (if not covered separately): typically £150-£300/year for a standard BTL
- Ground rent/service charge, if leasehold: highly variable -- £0 for freehold houses, potentially £1,000+/year for flats
Strip those out and the same £10,800 gross rent can land closer to £6,600-£7,000 net of operating costs -- before mortgage interest is even considered. That's a net yield closer to 3.7-3.9%, not 6%.
Then Section 24 Changes the Picture Again
If the property is mortgaged and held in personal name, mortgage interest isn't deducted from rental income before tax anymore -- you get a flat 20% tax credit on the interest instead, which costs higher-rate (40%/45%) taxpayers real money compared to the old system. Our Section 24 guide walks through the exact mechanics and an SPV comparison, since holding property in a limited company avoids Section 24 entirely but has its own tax and mortgage-availability tradeoffs.
How This Compares to Serviced Accommodation's Cost Model
PropertyAlert's SA/R2SA cashflow model bundles management, cleaning, and platform costs into one fixed 12% all-in figure -- deliberately simple and consistent. Standard BTL doesn't have an equivalent single number, because the real costs are genuinely more fragmented (agent fees, voids, maintenance, insurance, ground rent all vary independently) -- which is exactly why so many advertised "yield" figures quietly skip most of them.
What To Actually Check Before Trusting an Advertised Yield
Before shortlisting a deal on gross yield alone, ask: is this figure gross or net? If net, net of what specifically? Does it assume self-management or an agent? Has a realistic void period been factored in? What's the actual ground rent/service charge if leasehold? PropertyAlert's yield score is built gross and consistent for exactly this reason -- so browse live deals with the real gap between gross and net already in mind, not as a surprise six months after completion.