Holiday let yields in the UK

A holiday let yield is the annual return the property produces, expressed as a percentage of its value or purchase price. It is the number investors reach for first, and also the number most often quoted misleadingly, because holiday let income is usually advertised gross, before the heavy costs of running a short let come out. Understanding the difference between gross and net yield is the single most useful skill for assessing whether a holiday let stacks up.

This guide explains how holiday let yields are worked out, what a realistic figure looks like against buy to let, what moves yields up and down, and how yield shapes the mortgage a purchase supports. We arrange holiday let finance as a broker and introducer, not a lender, and worked examples here use deliberately simple, illustrative numbers. This is general information rather than investment advice.

Gross yield versus net yield: why the gap matters

Gross yield is annual income divided by property value, before any costs. Net yield is the same calculation after the running costs come out, and for a holiday let the gap between the two is wide, because short lets cost far more to operate than a buy to let. As a deliberately illustrative example, a 400,000 pound cottage earning 40,000 pounds of gross holiday income shows a 10 per cent gross yield, but once cleaning, fees, utilities, insurance, rates, maintenance and management take, say, 40 to 50 per cent of income, the net yield drops to somewhere around 5 to 6 per cent.

That gap is not a flaw in holiday lets, it is simply the cost of the model, but it catches out investors who compare a holiday let's gross yield with a buy to let's net yield. Always compare like with like. The costs that erode the gross are real and recurring: platform and booking commissions, cleaning and laundry on every changeover, energy and council tax or business rates, holiday let insurance, ongoing maintenance, a sinking fund for wear, and management fees if you do not run it yourself. The rental yield calculator on this site lets you model the full deduction.

How do you work out a holiday let yield?

Start with realistic gross income, built from the bottom up rather than from a headline. Estimate occupancy across the whole year, not just summer, and apply seasonal nightly or weekly rates, because a coastal let might charge a premium in August and a fraction of that in February. Multiply occupancy by seasonal rates to reach annual gross income, and sense-check it against what comparable local properties actually achieve on the booking platforms and against benchmarks such as the Sykes Staycation Index or AirDNA market data.

Then subtract the operating costs in full to reach net income, and divide that by the purchase price or value for net yield. The discipline is in the inputs: a credible occupancy figure and an honest cost base produce a defensible yield, while an optimistic occupancy and a forgotten cost line produce a fantasy. For investors, the net yield is the number that matters; for lenders, a related but separate income test decides how much they will lend, which we cover below.

What yield is realistic, and how does it compare to buy to let?

There is no single right figure, because location, property and management drive the result. As a qualitative frame, a well-located, well-run holiday let can produce a higher gross yield than a buy to let in the same area, but the two converge once you compare net to net, and in some cases a simple buy to let delivers a comparable net return for far less effort. The holiday let's advantage is greatest in prime, year-round destinations and thinnest in highly seasonal or secondary locations.

Treat any yield quoted by a selling agent or operator as a starting point to challenge, not a promise, and rebuild it from your own occupancy and cost assumptions. The investors who do well are usually those who buy where the net yield genuinely beats the alternatives after the 2025 tax changes, and who then improve it through pricing, occupancy and cost control. Our guide on whether a holiday let is a good investment puts yield in the wider context of risk and tax.

How does yield shape the mortgage a purchase supports?

Yield and lending are linked but not identical. A holiday let mortgage is not sized directly on yield; it is sized on whether the projected short-let income covers the mortgage payment under the lender's stress test, with a margin to spare. A property with a strong, well-evidenced income projection supports a larger loan, because the income clears the interest cover ratio comfortably even when stressed at a notional rate above the pay rate.

In practice this means a higher-yielding, strongly let property can borrow more at a given price than a marginal one, and a marginal income projection caps the loan to value a lender will offer regardless of the headline yield. This is why the income evidence matters so much: a credible agent's projection of low, average and high-season income, packaged well, is what unlocks the borrowing. We do that packaging as a broker, and the how much can I borrow calculator on this site gives a starting estimate of the loan a given income can support.