True or false: Net yield on a buy-to-let property always includes mortgage payments.

True or false: Net yield on a buy-to-let property always includes mortgage payments.

• A. False
• B. True
• C. Depends on the loan type
• D. Sometimes only partially

Answer: (A)

Net yield measures the income generated by the property from rent after operating expenses, expressed as a percentage of the price. Mortgage payments are financing costs (interest and capital repayments), not operating expenses, so they’re not included in the net yield calculation. If you were to include mortgage payments, you’d be calculating cash flow after debt service, which is a different measure. For example, if rent is £12,000 and operating costs are £3,000 on a £200,000 property, net yield would be (12,000 - 3,000) / 200,000 = 4.5%. If mortgage payments are £6,000, cash flow after debt service would be £3,000, but the net yield remains based on operating income, not financing. So the statement is false.

Net yield measures the income generated by the property from rent after operating expenses, expressed as a percentage of the price. Mortgage payments are financing costs (interest and capital repayments), not operating expenses, so they’re not included in the net yield calculation. If you were to include mortgage payments, you’d be calculating cash flow after debt service, which is a different measure. For example, if rent is £12,000 and operating costs are £3,000 on a £200,000 property, net yield would be (12,000 - 3,000) / 200,000 = 4.5%. If mortgage payments are £6,000, cash flow after debt service would be £3,000, but the net yield remains based on operating income, not financing. So the statement is false.