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Rental yield calculator: the first number every SPV lender checks
Gross yield is the headline; net yield, after running costs, is what the company's accounts will actually show. For a limited company purchase the yield also drives the interest coverage ratio, and with it the maximum loan. Both numbers are below.
Yield is one of three numbers a lender will care about. We model the other two with you on a free 15-minute call.
What yield means inside a limited company
For a company landlord, yield does two jobs. It sets the cashflow: net yield, after agent fees, insurance, repairs and voids, is the pre-tax return the SPV earns on the capital deployed, and inside the company that return keeps full mortgage interest deductibility before corporation tax. And it sets the leverage: lenders convert the rent into a maximum loan through the 125% company interest coverage ratio, so a 6% yield property borrows comfortably to 75% loan to value while a 4% yield property in the same company may be capped by rental cover instead. When a target property's yield looks marginal, the fixes are the same ones we check on every case: a five-year fix tested at pay rate, a lender with softer stress assumptions, or a larger director's loan in the deposit.
Take the result to the SPV stress test calculator to turn it into a maximum loan, read how the structure taxes the income in our limited company buy-to-let tax guide, or go straight to the limited company buy-to-let mortgages hub.
Rental yield questions
How do you calculate rental yield?
Gross yield is annual rent divided by purchase price: £15,000 of rent on a £250,000 property is 6%. Net yield deducts the running costs first, letting agent, insurance, repairs, voids, service charges, and is the number that actually predicts the company's pre-tax cashflow. The calculator above returns both.
What is a good rental yield for a limited company buy-to-let?
Most company purchases we arrange sit between roughly 5% and 8% gross, and the right answer depends on strategy. Below 5%, the case is usually a capital-growth play and rental cover at the 125% company ICR becomes the binding constraint on borrowing. Above 7%, typically HMOs, multi-units and northern stock, the rent supports full leverage with room to spare. Neither end is wrong; they are different businesses inside the same SPV wrapper.
Does yield change between company and personal ownership?
The gross yield is identical, the property does not care who owns it. What changes is what the yield has to support: a company keeps full mortgage interest deductibility and pays corporation tax, so more of the same rent survives as retained profit, while a higher-rate personal owner loses part of the yield to Section 24. Yield decides whether the deal works; structure decides who keeps the proceeds.
Why do lenders care about yield on a company application?
Because yield drives the interest coverage ratio. A company case is stressed at typically 5.5% against a 125% ICR, and a thin yield means rental cover caps the loan below the 75% loan-to-value ceiling, forcing a bigger director's loan into the deposit. Run the yield here, then the stress test, and you have the two numbers an underwriter reaches for first.