Rental income
Rental income is the amount paid by tenants to occupy the property. It is usually quoted as a monthly figure and summed to an annual total for calculations.
Rental income forms the starting point for most buy-to-let assessments, but it does not account for any costs associated with owning or financing the property.
Ongoing costs
Ongoing costs reduce rental income and determine whether a property generates a surplus or a shortfall each month.
Common ongoing costs include:
- Mortgage payments
- Letting or management fees
- Maintenance and repairs
- Insurance
- Service charges or ground rent (where applicable)
These costs can vary over time and should be included when estimating profit.
Monthly profit
Monthly profit is calculated by subtracting ongoing monthly costs from monthly rental income.
This figure is often used to assess:
- Day-to-day cash flow
- Whether the property can cover its costs
- Sensitivity to changes in rent or expenses
A positive monthly profit indicates surplus cash flow, while a negative figure indicates a shortfall.
Annual profit
Annual profit is calculated by multiplying monthly profit by twelve.
Annual figures are commonly used in return calculations, such as ROI, because they smooth out month-to-month variation and allow for easier comparison between properties.
Yield
Yield measures rental income relative to the purchase price of the property.
A common formula is:
Gross yield = annual rent ÷ purchase price
Yield is often used as a high-level comparison tool but does not account for financing or most costs.
Return on investment (ROI)
ROI measures profit relative to the total cash invested.
A common formula is:
ROI = annual profit ÷ total cash invested
Total cash invested typically includes the deposit and upfront purchase costs.
ROI reflects how efficiently invested cash is generating profit, rather than how much rent the property produces.
Using multiple metrics together
Each metric provides a different perspective:
- Rental income shows earning potential
- Profit shows cash flow
- Yield compares income to price
- ROI compares profit to invested cash
Looking at these figures together provides more context than relying on a single number.
Using the calculator
The calculator brings these figures together using consistent assumptions for rent, costs, and financing. Adjusting inputs allows you to see how changes affect income, profit, yield, and ROI at the same time.