How Much Profit Should You Make on a Rental Property?

• by Corbin Fairweather
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Everyone talks about making big bucks with rental properties, but let's get real—how much profit does a typical landlord actually walk away with? If you're thinking about jumping into buy to let, or you already own a place and want to know if you're doing it right, you're in the right spot. Should you be thrilled with £100 a month, or is that just scraping by?

Here's the quick answer: most experienced landlords shoot for a net profit, after all expenses, of at least £200-£400 a month per property. Some get more but plenty settle for less, especially if they're in pricier markets or dealing with high loan repayments. The key is making sure your investment works for you long term, not just covering the mortgage and calling it a day.

If you want to figure out what's a healthy profit, you've got to look past just the rent versus the mortgage. You've got repairs, tax, insurance, maybe agent fees, and all those little surprise costs that come out of nowhere—think new boilers or fixing burst pipes at 2am. You'll want to get familiar with terms like 'rental yield' and 'ROI' because they're the benchmarks all serious landlords watch. Stick around; you'll get the straight facts with no fluff, plus some smart tips to keep you in the black.

• The Real Numbers: What Profit Landlords Actually Make
• Understanding Rental Yield and ROI: The Non-Boring Stuff
• Hidden Costs That Can Eat Your Profit
• How to Boost Your Rental Returns (Without Losing Sleep)
• When Is a Rental No Longer Worth It? Red Flags and Gut Checks

The Real Numbers: What Profit Landlords Actually Make

If you ask around in landlord groups or browse online forums, you’ll quickly realize there’s no single magic number for rental property profit. Earnings depend on the property’s location, mortgage type, and whether you’ve got a fixing-up job or a move-in-ready place. But some numbers come up again and again.

Most landlords in the UK say they bank between £200 and £400 a month, after all the bills are paid. This ‘net profit’ figure is after you’ve dealt with mortgage repayments, tax, insurance, basic repairs, and any letting agent fees. Bare minimum, if your property is cash-flow neutral, you’re not losing money, but that’s not the goal.

Why isn’t profit just skyrocketing along with rents? Well, mortgage rates have shot up since 2022. If you bought a property with a 2% interest rate and now face 5% at renewal, your monthly costs jump fast. Also, average property maintenance eats up about 10% of your annual rent, and void periods—when a place sits empty—can really hit hard.

Aim for this simple rule: your rental property profit should beat what you’d get from sticking your savings in a bank account or basic stocks. A return of 5% or more (after costs) on your cash is a commonly cited sweet spot in property circles. If you’re below that, ask yourself if it’s worth the hassle and risk.

• Don’t count on capital growth bailing you out. Monthly rental yield matters most for your regular income.
• Keep tabs on all expenses—letting agents, legal fees, safety checks, and emergency fixes.
• If your net profit drops toward £0 or negative for more than a few months, that’s a sign something’s off—maybe time to check your numbers or rethink your strategy.

Seeing these actual numbers makes it easier to spot a solid buy to let investment—and to set realistic goals for your next move as a landlord.

Understanding Rental Yield and ROI: The Non-Boring Stuff

Most property investors toss around words like “rental yield” and “ROI” (Return on Investment) like they’re common sense, but it’s way too easy to get lost if you’re new. Bottom line, these are your scorecards for how much your buy to let actually earns you.

Rental yield is the annual rent you collect as a percentage of what you paid for the property (or what it's worth). In the UK, a rental yield of 5% to 8% is generally considered solid—anything less can feel like you’re just working for the bank. The maths isn’t tough, but you have to get it right:

• Add up your annual rent (what your tenant pays in a year).
• Divide that by the price you paid for the property.
• Multiply by 100 to get your rental yield percentage.

So if your rent is £12,000 a year and the house cost you £200,000, your rental yield is 6%. Simple, but surprisingly, a lot of landlords forget to factor in all their real costs, which can kill your profit.

Now, let’s dig into ROI. This one tells you how well your investment is working for you after all the boring bills, repairs, and taxes. Think of ROI as “what’s actually left in your pocket.” For property, calculate it like this:

• Take your annual net profit (that’s rent minus all true expenses—mortgage, insurance, agent fees, repairs).
• Divide that by your own money invested (usually your deposit plus any buying costs).
• Multiply by 100 to get the ROI percentage.

Here’s a quick numbers table for reference:

Rental property profit is all about keeping an eye on both your yield and ROI—not just one or the other. Some people get fixated on a high yield but forget about costs that can drain their actual profit. Always run the numbers before you buy. If it doesn’t stack up now, it won’t suddenly get better once you own the place. And if someone promises wild returns, be skeptical.

Pro tip: higher rental yield often means your property is in a less “posh” area, but you might be getting more cash for every pound you put in. If you want both ease of management and a halfway decent rental yield, suburban areas outside big cities often hit the sweet spot.

Hidden Costs That Can Eat Your Profit

This is where most newbie landlords get caught out. You work out the rent, subtract the mortgage, and think you’re sorted. But the costs you didn’t plan for can quietly chip away at your rental property profit. Miss these, and your investment might end up running on fumes or even losing money.

So, what’s lurking beneath the surface?

• Repairs and Maintenance: Even if your property is brand new or recently renovated, stuff will break. On average, you should budget at least 1% of the property’s value per year for repairs. Boilers and appliances tend to fail at the worst moments, so have an emergency fund.
• Letting Agent Fees: If you’re using an agent to manage the property, expect to pay 8-15% of your monthly rent for full management, or around one month’s rent to find a new tenant. That’s money straight out of your buy to let returns.
• Void Periods: It’s rare to have a tenant 100% of the time. Even if you’re doing everything right, expect the place to be empty for a few weeks a year. That’s income you don’t get, but the bills keep coming.
• Insurance: Building insurance is a must, and landlords often add extra cover for rent loss or legal expenses. This isn’t huge—£20-£40 a month on average—but it adds up.
• Legal and Compliance Costs: Gas safety certificates, electrical checks, and new regulations (which seem to pop up every year) are non-negotiable. Forgetting them can lead to big fines. Expect at least £200-£500 in annual compliance checks, sometimes more if new rules get introduced.
• Taxes: The government changed how landlords get taxed in the UK. You can’t just deduct all your mortgage interest anymore; now you get a 20% tax credit instead. Factor this into your numbers or your expected profit could shrink fast.
• Service Charges and Ground Rent: If you own a flat, these fees are not optional. They can range from £1,000 to £2,500 a year, sometimes even more in London.

Here’s what these costs might actually look like each year for a typical buy to let flat rented at £1,200/month in Manchester:

If you weren’t expecting all that, you’re not alone. The key to solid rental yield isn’t just collecting rent—it’s staying ahead of the drains on your profit. Go through last year’s statements (if you’ve got them) or talk to other landlords nearby to get real numbers you can trust.

How to Boost Your Rental Returns (Without Losing Sleep)

If you’re aiming for better rental property profit, you don’t need to gamble or take on extra stress. Most successful landlords increase their returns by making smart, simple choices rather than trying wild strategies. Here’s how to step up your game—without losing sleep.

1. Review Your Rent Regularly

Don’t just set it and forget it. Compare local rents every year. If your property is underpriced by £50 a month, that’s £600 a year you’re missing out on. Tenants expect small increases over time. Just don’t go overboard—big spikes can cause turnover, which usually costs you more.

2. Cut Out Dead Weight Expenses

• Switch insurance providers every couple of years. Landlords who shop around save an average of 20% on policies.
• Find out if you can self-manage instead of using an agent. Managing yourself can save up to 10% of gross rent, but only if you’ve got the time and patience.

3. Give Your Property a Mini Makeover

• Fresh paint and modern light fittings can bump your rent by £25-£50 a month without big spend. A good-looking kitchen or bathroom adds even more, and often pays for itself in under two years.
• Add energy-efficient features like LED lights or smart thermostats. These help with tenant retention, so you don’t lose cash on empty months.

4. Target the Right Tenants

The best tenants pay on time and stay longer. If your property is near a university, students might bring higher yields (but expect more wear and tear). Near business parks? Professionals usually mean fewer headaches. Adjust your listing and features to attract the group that suits your area best.

5. Put Systems on Autopilot

• Use standing orders for rent—the less time chasing payments, the better.
• Keep a short list of trusted tradespeople so repairs get done fast, not frantically.
• Keep digital records of all expenses—save time and avoid tax-day headaches.

Rental yield and ROI are only as healthy as your planning. Tweak a few of these, and you’ll notice your profits growing bit by bit—no sleepless nights required.

When Is a Rental No Longer Worth It? Red Flags and Gut Checks

There’s no shame in asking when you should cut your losses. Plenty of landlords hold on to a rental property profit because they’re scared to give up—even when it’s barely breaking even, or worse, losing money. If you’re wondering if it’s time to sell up, there are a few telltale red flags to watch for, and a few gut-check questions you need to ask yourself.

• Your rental yield drops below 4% for a long stretch. For most UK buy-to-let spots, anything under that means your money could probably work harder elsewhere—like stocks or even high-interest savings.
• Constant repairs or nightmare tenants keep eating into your profits. If you’re always replacing boilers, dealing with leaks, or chasing unpaid rent, your ‘profit’ on paper can disappear real fast.
• Rising costs outpace your ability to raise the rent. Landlords in 2024 saw insurance premiums jump over 20% in a single year, and if local laws put caps on rent, you can’t just charge more to make up the gap.
• If you wouldn’t buy the property again today, that’s a signal. Tastes and markets change. If your place is hopelessly outdated or gets less demand each year, it’s worth thinking about selling.

Let’s talk numbers. You want to look at your property investment as a business—not a sentimental project. If your rental property profit has been trending downward for three years, or if your annual return drops under inflation, it’s definitely time for a hard look.

If you tick just one or two of these, maybe you can turn things around with some smart upgrades or by tweaking your management. But if it’s most or all, it’s probably time to cash out and put your money somewhere it actually grows. Remember, not every buy to let needs to be a forever deal. Sometimes the bravest move in property investment is knowing when to walk away.