Jun 03, 2025

Rental Yields Explained: What Landlords Should Look for in 2025

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Whether you’re an experienced landlord or exploring your first buy-to-let investment, understanding rental yield is essential in 2025’s property landscape. With mortgage rates, tenant demand, and regional house prices in flux, knowing how to calculate and improve your yield can make all the difference.

What is a good rental yield?

Rental yield is the return you earn from letting out a property, expressed as a percentage of the property’s value. It gives you a quick way to compare potential returns from different properties.

In 2025, a “good” rental yield typically falls between 5% and 8%, depending on the location and property type. Higher yields may indicate stronger returns but can also come with higher management or maintenance risks.

How do I work out rental returns?

There are two ways to calculate yield:

  • Gross rental yield
    (Annual rental income ÷ Property purchase price) × 100
    For example:
    £10,800 annual rent ÷ £200,000 property price = 5.4% gross yield

  • Net rental yield
    (Annual rental income – costs) ÷ Property purchase price × 100
    This accounts for expenses like mortgage payments, insurance, letting agent fees, and maintenance.

Tip: Net yield gives a more accurate picture of actual return, especially important with inflation and cost-of-living pressures affecting landlords in 2025.

What affects rental profit?

Several key factors influence your rental income and profitability:

  • Location – Rental demand is high in university towns, commuter belts, and areas with strong job markets. Gloucester and its surrounding areas continue to offer a strong balance of affordability and demand.

  • Property type – Flats often offer better yields than large detached homes due to lower purchase costs.

  • Tenant demand – Strong demand can mean fewer void periods and potential for rent increases.

  • Running costs – Mortgage interest, insurance, letting fees, and maintenance all eat into profits.

  • Energy efficiency – New EPC requirements may require upgrades, but energy-efficient homes can attract better tenants and higher rent.

Talk to us about maximising your property’s return.
Whether you’re reviewing your current portfolio or considering a new investment, our lettings experts are here to help you make informed, profitable decisions in 2025.

📞 Call us or pop into your local Michael Tuck branch

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