There are two fundamental forms of yield to be aware of when investing in property. One is Gross Yield and the other is Net Yield.
Gross Yield is calculated by dividing the annual rent by the property value and is expressed as a percentage. For example if the annual rent is £6,000 and the property value is £100,000 then the gross yield is £6,000/£100,000 = 0.06, which is 6%.
Net yield is calculated by taking away the annual running costs ie insurance and agent fees from the annual rent and then dividing this figure by the property value. For example if the annual rent is £6,000, costs £1,000 and the property value is £100,000 then the net yield is £6,000-£1,000 = £5,000/£100,00 = 0.05, which is 5%.
