Gross yield is useful. It isn’t the whole investment case.
Gross yield is probably the single most-quoted number in buy-to-let investing, and for good reason. It’s quick to calculate, easy to compare across properties, and gives a useful first read on whether a purchase price is roughly in line with the rent it might achieve. Divide the annual rent by the purchase price, multiply by 100, and you have a percentage you can hold up against your own minimum threshold.
That simplicity is also its limitation. Gross yield answers one question — how does the rent compare to the price? — and leaves several other important questions untouched.
What gross yield leaves out
Gross yield is calculated before costs. It doesn’t account for mortgage interest, insurance, maintenance, letting agent fees, service charges on leasehold properties, or the cost of periods when the property sits empty between tenancies. Two properties with an identical 8% gross yield can have very different economics once those costs are applied — one with low ongoing costs and reliable demand, the other with a service charge that quietly erodes a meaningful share of the return.
It also says nothing about capital risk, the condition of the property, the strength of rental demand in that specific street, or how realistic the rent figure actually is in the first place — which is its own separate problem, and one worth treating carefully in its own right.
What it’s still good for
None of this makes gross yield useless. As a fast, consistent filter across a large number of opportunities, it does exactly what it’s meant to do: it lets you quickly rule out properties that are obviously priced too high for the rent they’re likely to achieve, without doing a full financial workup on every single listing you come across.
The mistake isn’t using gross yield. It’s treating it as a complete answer rather than a starting filter — and then being surprised when the actual return on a property looks different once real costs are accounted for.
A more complete picture
A fuller assessment of a property’s investment case typically also considers net yield or cashflow after realistic costs, the property’s condition and any refurbishment required, the strength and reliability of the rental evidence behind the figure, and the wider context of the mandate the property is being weighed against — because a yield that clears your threshold on a property type or area outside your strategy usually isn’t a strong match regardless of the number.
A number that’s quick to calculate is not the same as a number that tells you everything you need to know.
This is part of why PropSignals treats gross yield as one calculated figure among several, rather than a standalone verdict — and why every figure it produces is labelled by how well it’s evidenced, so you can see exactly what a number is, and isn’t, telling you.