Which statement about net yield on a buy-to-let property is correct?

Which statement about net yield on a buy-to-let property is correct?

• A. The net yield includes mortgage payments.
• B. The net yield includes running costs but not mortgage payments.
• C. The net yield equals rent as a percentage of purchase price.
• D. The net yield is the rent minus mortgage payments as a percentage of purchase price.

Answer: (B)

Net yield measures the return from a buy-to-let property after deducting running costs from the rental income, relative to the purchase price. In other words, you take the annual rent, subtract ongoing operating costs (maintenance, letting agent fees, insurance, service charges, upkeep, etc.), and divide that net figure by the purchase price. Mortgage payments are financing costs and are not part of the yield calculation; they affect your overall cash flow, but not the yield percentage itself. So the statement that net yield includes running costs but not mortgage payments correctly reflects this definition. The other ideas mix in financing costs or treat yield as gross rent, which isn’t how net yield is defined.

Net yield measures the return from a buy-to-let property after deducting running costs from the rental income, relative to the purchase price. In other words, you take the annual rent, subtract ongoing operating costs (maintenance, letting agent fees, insurance, service charges, upkeep, etc.), and divide that net figure by the purchase price. Mortgage payments are financing costs and are not part of the yield calculation; they affect your overall cash flow, but not the yield percentage itself.

So the statement that net yield includes running costs but not mortgage payments correctly reflects this definition. The other ideas mix in financing costs or treat yield as gross rent, which isn’t how net yield is defined.