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Buy-to-let cash flow vs yield (UK): what to track and what people miss

Cash flow and yield measure different things. Learn the difference, see worked examples, and use a checklist of costs landlords often miss.

Published: 18/03/2026 • Last verified: 18/03/2026

Summary

If you’re looking at a buy‑to‑let property, yield and cash flow answer different questions:

  • Yield is about return as a percentage of the property price/value.
  • Cash flow is about money in vs money out each month.

You can have a property with a “good yield” that has poor cash flow, and vice versa. The safest approach is to track both and stress‑test your assumptions.

Use the rental yield calculator as you read:

This guide is general information only. It is not tax advice or financial advice.

Key terms (quick definitions)

  • Gross yield: headline rent vs price/value (before most costs). /glossary/gross-yield/
  • Net yield: yield after ongoing costs (before tax and mortgage costs). /glossary/net-yield/
  • Cash flow: your monthly surplus/deficit after rent and costs (and often after mortgage payments).
  • Void period: time with no tenant and no rent. /glossary/void-period/

How it works

Yield (percentage return)

A simple gross yield formula is:

  • Gross yield (= \text{annual rent} \div \text{purchase price})

Net yield is similar, but uses annual rent minus ongoing costs.

Cash flow (monthly reality)

Cash flow is usually tracked monthly:

  • Cash flow (= \text{rent received} - \text{costs} - \text{mortgage payment})

If you miss a cost (or underestimate voids), your cash flow estimate can look much healthier than real life.

Why people confuse the two

Yield is quick to calculate and easy to compare. Cash flow is messier — but it’s the number that determines whether the property feels “comfortable” or “tight” month to month.

Worked examples

These examples are illustrative and use simplified costs.

Example 1: Great yield, tight cash flow

Assume:

  • Price: £200,000
  • Rent: £1,000/month (£12,000/year)
  • Mortgage payment (interest‑only example): £850/month
  • Other costs: £150/month (insurance, maintenance allowance, agent)

Gross yield:

  • (£12,000 \div £200,000 = 6%)

Cash flow:

  • (£1,000 - £850 - £150 = £0) per month

This looks fine on yield, but there’s no buffer for repairs or a void month.

Example 2: Lower yield, healthier cash flow

Assume:

  • Price: £200,000
  • Rent: £950/month
  • Mortgage payment: £650/month
  • Other costs: £150/month

Gross yield:

  • (£11,400 \div £200,000 = 5.7%)

Cash flow:

  • (£950 - £650 - £150 = £150) per month

The yield is slightly lower, but the monthly position can be more comfortable.

Example 3: The “void period” reality check

If the rent is £1,000/month and you assume:

  • one empty month per year (a simple void allowance),

then your “effective” annual rent becomes:

  • (£1,000 × 11 = £11,000) instead of £12,000

That single assumption changes both net yield and cash flow planning.

Common mistakes

  • Using gross yield only: always sense‑check costs and voids.
  • Ignoring one‑off costs: letting fees, compliance checks, initial repairs.
  • Assuming rent is guaranteed: build in voids and late payments.
  • Treating every cost as monthly: some costs are annual (insurance) or lumpy (repairs).
  • Forgetting service charges / ground rent (leasehold): these can materially change net yield.
  • Not stress‑testing interest rates: your mortgage payment can rise after a fixed deal ends.

What to do next

Related glossary:

Sources