Buy-to-let · cash flow and rental yield
UK buy-to-let cash flow and rental yield: why the same yield can hide different results
Gross rental yield tells you how rent compares with the price. Cash flow tells you what is left each month after the costs you have counted. Two properties can share a yield and still behave very differently once a service charge changes.
Two different questions
Gross yield and cash flow are not the same measure
Gross rental yield
Monthly rent × 12 ÷ purchase price × 100.
It ignores every cost. Useful for a quick comparison between properties; it does not represent money available to spend.
Simple monthly cash flow, before tax
Rent − monthly costs − (annual allowance ÷ 12) − (annual interest ÷ 12).
It reacts to service charges, upkeep and financing. It is still only as complete as the costs you enter.
Hypothetical, not typical
A worked comparison: one cost changes
Hypothetical figures chosen to show the arithmetic. They are not a typical deal, a market rate or a recommendation. Only the monthly service charge / management cost differs between the two scenarios.
| Input | Scenario A | Scenario B |
|---|---|---|
| Purchase price | £250,000 | £250,000 |
| Monthly rent | £1,500 | £1,500 |
| Service charge / management | £150 per month | £450 per month |
| Maintenance / insurance allowance | £100 per month (£1,200 a year) | £100 per month (£1,200 a year) |
| Mortgage interest estimate | £750 per month (£9,000 a year) | £750 per month (£9,000 a year) |
A · Gross yield
7.2%
£18,000 ÷ £250,000 × 100
A · Monthly cash flow, before tax
£500
£1,500 − £150 − £100 − £750
B · Gross yield
7.2%
Unchanged: costs are not in the formula
B · Monthly cash flow, before tax
£200
£1,500 − £450 − £100 − £750
A £300 rise in the monthly charge removes £300 of monthly cash flow, from £500 to £200, while the headline yield stays at 7.2%. Yield alone would not have flagged the difference.
Both results are before tax and before omitted costs such as voids, mortgage capital repayments and purchase transaction costs. Check the charge itself with the leasehold service charge checklist.
Read the small print of your own numbers
Assumptions and omissions
Assumed
- Rent is received for all 12 months.
- Costs not entered are treated as £0.
- Interest is an estimate, not a mortgage quote.
Left out
- Tax, voids and reletting costs.
- Mortgage capital repayments and purchase transaction costs.
- Ground rent, major works and any forecast of capital appreciation.
- It is not a net yield or lender affordability calculation.
A practical order of work
Six decision steps before an offer
01
Evidence the rent
Use achievable rent supported by evidence, not the highest advertised figure. Write down where the number came from.
02
Calculate gross yield
Annual rent divided by purchase price, times 100. Use it to compare properties on a like-for-like basis, nothing more.
03
List every recurring cost
Service charge, ground rent where applicable, insurance, maintenance and management. Do not leave a blank to mean zero.
04
Add financing separately
Enter an interest estimate as its own line so you can see how much of the result depends on borrowing terms.
05
Stress the assumptions
Ask what happens if rent is 10% lower or costs are 20% higher. These are illustrative checks, not forecasts or safety margins.
06
Review before an offer
Check leasehold documents, major works and the gaps the arithmetic leaves out. Pause if critical questions remain unanswered.
Go deeper with the rental yield versus cash-flow guide, the property investment stress test and the free ten-question pre-offer self-review.
Run your own figures
Arithmetic first, then the checks it cannot do
The free buy-to-let calculator gives gross yield and a simple before-tax monthly cash flow. No signup.
The UK Property Investor Toolkit 2026/27
A 19-page PDF that goes beyond the arithmetic: due-diligence questions, leasehold and service-charge checks, stress-test prompts and a structured pre-offer review with a red-flags worksheet.
£14.99 one-time launch offer, was £49. PDF only; no spreadsheet or subscription.
Educational material only. It is general information, not personalised financial, mortgage, tax or legal advice, and no outcome or return is guaranteed. Property values and rental income can go down as well as up. Consider speaking to a suitably qualified, regulated professional about your own circumstances.