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How to Work Out Rental Yield on your Property in Peterborough

Name: How to Work Out Rental Yield on your Property in Peterborough
Brand: Progressive Lets
Rating: 4.9 (520 reviews)

By Wayne Beecham | Created on 2nd November 2026

When assessing whether a property is a good investment, the rental yield is a key measure to use. If you are wondering – how do I calculate a yield on a rental property?, this guide explains the process for working this out.

Calculating rental yield allows you to be confident that you can cover all necessary expenses and make a reasonable return. Before you buy a property, understand the numbers through net and gross rental yield, and learn how to use a rental yield calculator.

A flat in central Peterborough areas will have very different numbers compared to a detached property in Cambridgeshire or Stamford. Read on to find out all the factors to take into account before you put in an offer for a Peterborough property.

What Is Rental Yield?

Rental yield is a measurement that is used to calculate how profitable a rental property is likely to be.

Rental yields describe your annual rental income expressed as a percentage of the total value of the property. It is used by buy-to-let investors to determine whether a property will be a good investment or to understand the return on investment of a property they already own. Attractive rental yields are a key part of the conversation when considering a pension or property as a long term investment.

Why Is Rental Yield Important?

Rental yield is important because it gives buy to let property landlords an accurate calculation of the value of their property investment. Working out rental income alone doesn’t take into account key factors such as capital appreciation, changing mortgage rates and fluctuations in house prices.

To ensure that an investment will be worthwhile and profitable, rental yield provides a comprehensive calculation to check that landlords can generate a good long-term ROI.

What is the Difference Between Gross and Net Rental Yield?

Net rental yield is based on monthly rental income less costs. Gross rental yield is a quick calculation that doesn’t consider expenses. Since you don’t need details of the likely costs, gross rental yield is a popular way to compare potential investment properties early on.

This is the formula for calculating both:

Gross rental yield (%) = (Annual rental income ÷ Property value) × 100

Net rental yield (%) = [(Annual rental income − Annual running costs) ÷ Property value] × 100

At A Glance: Gross vs Net Rental Yield Table

Factor	Gross Rental Yield	Net Rental Yield
Calculation	Annual rent ÷ Property value × 100	(Annual rent − Running costs) ÷ Property value × 100
Expenses	Not deducted	Deducted
Accuracy	Basic income estimate	More realistic return
Best for	Comparing investment properties	Assessing rental profitability
Example	6%	4.8%

Capital Appreciation

Property investors also make money from capital appreciation, which is the value by which the property goes up over time. According to ONS, property prices in Peterborough between July 2025 and July 2026 had an average selling price of £235,000.

Further data from the ONS shows that the average monthly rent in Peterborough increased by 4.9% (from £965 to £1,012) for the same period.

To estimate appreciation, you must compare the expected price five, ten or twenty years from now with the current selling price. A knowledgeable local estate agent will be able to help you with this.

Divide the expected gain by the house price, and multiply by 100 to give the capital gain percentage.

For instance, if today’s house price is £400,000 and you expect the property to be worth £450,000 in ten years, the following calculation would tell you the estimated capital appreciation, in this case, 12.5%

Price in ten years’ time (£450,000) – House price (£400,000) = Gain (£50,000)
Gain (£50,000) ÷ House price (£400,000) = 0.125
0.125 x 100 = 12.5%

Rental yield and property appreciation should be considered before purchasing an investment property.

Rental Yield vs Capital Growth: Which Matters More?

Which matters more will generally depend on whether your investment goals are focused more on long-term profits or regular rental income. For investors looking for a return in ten or more years, capital appreciation may be the key focus.

However, for investors looking for a reliable income stream, a strong rental yield could be more important. A property with a lower rental yield can outperform a property with higher rental yield if the property value grows more.

How To Work Out Rental Yield

To work out the net rental yield for a property follow these steps:

Determine your annual rental income
Deduct your costs
Divide this number by the value of your investment
Multiply this figure by 100 to give a rental yield percentage. The rental yield formula is shown below:

Rental yield = ((Annual rental income – Annual costs) ÷ Investment) x 100

For gross rental yield calculations, refer to the formula provided in the section: What is the Difference Between Gross and Net Rental Yield?

Annual Rental Income

Estimate how much you can charge in rent, look on property portals like Rightmove and Zoopla, or talk to a local letting agent. Remember that the asking price isn’t always the amount achieved, so you should test your calculations with conservative rental income estimates.

Multiply that amount to get the total rent you would collect in a year. For weekly rent, multiply by 52.

Most landlords experience void periods at some point. We recommend you stress test your calculations based on 11 months of rental income.

Annual Running Costs

An online rental yield calculator probably won’t include ongoing expenses, giving a much higher and unachievable rental yield. Actual rental income is the rent left over after your expenses have been met. Typical landlord costs include:

Annual mortgage costs
Landlord insurance
Maintenance costs
Letting agent fees
Council tax and utility bills during void periods

Investment

If you bought the property in cash, this is the property’s purchase price. For property purchased with a mortgage, use the deposit you put down.

Add the following costs that come with buying:

Stamp duty
Solicitors fees
Survey fees

Include any costs you incur preparing your property for rental, for instance, redecorating and buying furniture and white goods. Find out more about your landlord tax return here or contact our lettings team for advice for first-time landlords.

Example Of Rental Yield On A Peterborough Property

A two-bedroom apartment in Peterborough commands monthly rent of £1,050, which adds up to an annual rental income of £12,600

The sale price of the above property would be around £230,000.

The stamp duty would be £11,500. Add an estimated cost for professional fees of £2,000.

It is impossible to predict what maintenance your buy-to-let property will need, but property experts recommend budgeting for spending 0.5% of its value per year. In this case, £1,150 per year.

Purchased Without A Mortgage

Annual rental income (£12,600) – Running costs (£1,150) = Annual profit (£11,450)
Purchase price (£230,000) + Buying costs (£11,200 + £2,000) = Investment (£243,200)
Annual profit (£11,450) ÷ Investment (£243,200) = 0.047
0.047* 100 = 4.7%

If you pay estate agent fees and landlord insurances, you should also factor these outgoings into your rental yield calculation.

Purchased With A Mortgage

Say you took out an interest-only buy-to-let mortgage for 75% of the purchase cost (£230,000) at a rate of 4.5%.

Your interest-only monthly mortgage payments would be £650 or £7,800 per year (this is an example figure, the exact amount would depend on your mortgage deal and term length).

Your deposit is £57,500 (the remaining 25% of the property price).
Annual rental income (£12,600) – Running costs (£1,150 + £7,800) = Annual profit (£3,650)
Purchase price (£57,500) + Purchase costs (£11,200 + £2,000) = Investment (£70,700)
Annual profit (£3,650) ÷ Investment (£70,700) = 0.0519
0.0519 * 100 = 5.19%

How can I maximise my rental yield?

There are several ways that you could potentially increase your rental yield:

1. HMO properties

Houses of multiple occupation (HMO) typically achieve a higher rental yield than traditional buy-to-let properties, often as much as three times higher. Progressive Lets are experts at managing HMOs across Peterborough and beyond.

2. Reducing outgoings

If you purchase a property with a buy to let mortgage, make sure you find the best mortgage interest rates to keep your mortgage payments as low as possible. You may also be able to reduce maintenance costs by using more competitive contractors.

3. Raising the rent

Check whether your current rent is in line with the local rental market. If you have not increased the rent for a while, this could be an option, but this should be done with caution.

Rent increases must be fair and realistic, and tenants can challenge increases that they believe to be unfair through a First-tier Tribunal. Under the Renters’ Rights Act, landlords can only increase rent once per year and must use a Section 13 Form 4A to lawfully increase rent, as rent review clauses no longer exist.

You should also weigh up the risk of losing a good, reliable tenant if you increase the rent.

4. Expanding the property

You could expand the size of the property with an extension, either to accommodate more tenants in an HMO or to increase the rental price. In this case, you would have to consider how the costs affect your rental yield and property appreciation.

5. Improving the property

Smaller improvements to the property could help to attract high-paying tenants. For example, upgrading the kitchen and bathroom could help to achieve higher rent.

What Is A Good Rental Yield?

There is always a demand for rental property in and around Peterborough. Relatively high house prices mean a buy-to-let property must work hard to generate a healthy return. Anywhere between 5-8% is considered an excellent rental yield.

According to ONS, the average rent in Peterborough is £1,012 per month, generating average rental yields of around 5.5%. Calculate your rental yield percentage for a more accurate projection of monthly rental income.

We Can Help

Our Full Management service provides you with complete peace of mind. From finding reliable tenants to ensuring all legal compliance is met, we will cover every aspect of letting your property.

Frequently Asked Questions

Should I buy a Peterborough buy-to-let through a limited company?

A limited company suits some investors, particularly higher-rate taxpayers with a mortgage, but it is not right for everyone. Individual landlords receive only a 20% tax credit on mortgage interest. Companies deduct interest in full and pay corporation tax instead. Company ownership also brings accounting costs and tax on profits you take out, so ask an accountant to model your own figures before you buy.

Does an interest-only mortgage give a better yield than a repayment mortgage?

An interest-only mortgage gives a higher cash return in the early years because the monthly payments are lower. It leaves the full loan to repay at the end of the term, though. A repayment mortgage trims your monthly profit but steadily reduces the debt. The better choice depends on your exit plan, so test both against realistic rent before committing.

How does a rental valuation work, and how accurate is it?

A letting agent compares your property with similar homes currently let and recently let nearby. The agent also considers size, condition, furnishing and tenant demand. Agreed rents often differ from advertised prices, so a rental valuation gives a firmer figure for your yield calculation than portal listings. Book a valuation with Progressive Lets before you set your rent or make an offer.

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Wayne Beecham

Wayne is East Midland’s answer to property management. His hard work and high standards of service have gained him a fierce reputation within the regional lettings market. He knows what it takes to own and manage a profitable portfolio himself, because he is not only a successful investor and landlord, but co-founder and “hands on” managing director of Progressive Lets.

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