Rental return on a property is simply the amount of income that you earn in any given year after costs such as mortgage payments and the initial outlay on the house or other property. It is also known as rental yield by some.
Working this out involves adding up all of the money you bring in from your tenant across the year, and then deducting all of your outgoings, of which mortgage will be the largest, most likely, alongside the likes of insurance and tax.
This gives you what is known as the real rental income level, and you use this to calculate your return overall. So, for example, if your property cost £100,000 to purchase in the first place, and your real rental income sits at £5,000, it is simply 5,000/100,000, which gives you 0.05, or five per cent rental return.
Answered on Mar 18 2013,