Is an 8% Yield Still Good Enough in 2025? What Landlords Need to Know in Today's Market

There was a time when an 8% gross rental yield was considered a safe and solid benchmark for property investors. It offered the reassurance of decent returns, room for unexpected costs, and a clear sense of value. But in the market we face today — with mortgage rates sitting around 6%, increased regulatory demands, and higher operational costs — it's only natural that landlords are starting to ask, "Is 8% still enough?"

At Stewarts Estates, we work closely with landlords across Bournemouth, Poole and Christchurch, and we're hearing this question more often than ever. Whether you're purchasing through a limited company to mitigate Section 24 tax restrictions or you're simply reassessing the performance of your current portfolio, it's crucial to understand what 8% means in 2025, beyond the headline figure.

In this article, we'll break down how today's economic landscape has reshaped yield expectations, help you understand the real returns behind that number, and offer insights into how you can invest with clarity, strategy, and confidence.

Let's take a practical look at what an 8% gross yield delivers in today's economic conditions.

Example:

• Monthly Rent: £1,400
• Annual Rent: £16,800
• Purchase Price: £210,000
• Gross Yield: 8%

Now factor in a 75% Loan-to-Value mortgage at an average interest rate of 6%:

• Mortgage amount: £157,500
• Annual mortgage interest (interest-only): £9,450

Other typical expenses:

• Letting & management fees, insurance, maintenance, voids, compliance: ~15% of Rent = £2,520

Your net position?

• Total income: £16,800
• Less mortgage: £9,450
• Less operating costs: £2,520
• Estimated pre-tax profit: £4,830 per year

That's approximately a 2.3% net yield on the property value, or roughly a 6.4% return on invested capital (assuming a 25% deposit of £52,500).

When landlords hear "8% yield", they often imagine a healthy profit. But once you layer in today's costs and lending rates, the actual margin is far slimmer. That's why looking beyond the gross figure is now essential.

While yield is a great starting point, relying on it exclusively can lead to misleading conclusions, especially in today's property landscape.

Yield tells you how much rental income a property could generate relative to its purchase price, but it doesn't take into account:

• Mortgage terms and cost of borrowing
• Void periods where the property stands empty
• Maintenance and compliance costs (which are rising)
• Capital appreciation or depreciation
• Tax implications depending on how you own the property

For example, two properties offer identical yields on paper. Still, if one is located in an area with strong price growth potential and lower ongoing maintenance needs, its long-term return could be far superior.

That's why savvy investors now consider total return: the combined impact of rental income and capital growth over time, taking into account expenses. They also factor in net cash flow, which reveals how much money is actually left in your pocket each month after all costs are paid.

In the next section, we'll share what kind of returns are worth targeting in 2025 and how to structure your investments to withstand today's financial pressures.

In light of today's lending environment, legislative pressures, and ongoing costs, the benchmark for a "good" return has evolved. While an 8% gross yield may have once been sufficient, most landlords now seek investments that offer greater margin and flexibility.

As a general rule:

• Single lets in low-maintenance areas should aim for at least 8–9% gross yield to remain viable
• HMOs or multi-let properties often target 10–12%+ due to higher management intensity
• Holiday lets and serviced accommodation can outperform, but come with higher volatility

More importantly, landlords should focus on:

• Net cash flow: What's left after mortgage, management, maintenance, and tax?
• Return on investment (ROI): Significant for those using leverage
• Resilience: Can your property still perform if interest rates rise or rent dips?

In 2025, a good investment isn't just about what you can earn — it's about how well that investment can weather change. Properties with strong fundamentals, promising future growth prospects, and opportunities for improvement or added value are the ones that stand out.

In the next section, we'll share practical ways landlords can optimise their returns and strengthen their portfolios in today's market.

What can you do if your current or prospective investment doesn't quite hit the mark?

Here are several ways landlords can actively boost returns and reduce risk:

• Add value through refurbishment: Improving kitchens, bathrooms, energy efficiency or layout can justify higher rents and increase the property's capital value.
• Consider multiple occupancy: If suitable, converting a property to an HMO can significantly increase monthly income.
• Increase energy performance: With EPC requirements tightening, future-proofing now could help you command better Rent and stay compliant.
• Review your financing: Consult with a mortgage broker to explore refinancing options. Even a slight drop in interest rate can dramatically improve cash flow.
• Professional property management: A good letting agent can reduce void periods, improve tenant retention, and ensure legal compliance — all of which protect your income.

Lastly, keep your investment strategy under review. What worked in 2018 may not be sufficient in 2025. Whether it's restructuring your portfolio, targeting different tenant demographics, or switching to a more tax-efficient ownership model, flexibility is now key.

At Stewarts Estates, we specialise in helping landlords understand their options, improve profitability, and protect their assets in a changing market.

The property market in 2025 requires a more informed and analytical approach than ever before. With lending rates, legislation, and overheads all playing a bigger role in shaping returns, landlords must be more strategic and less sentimental.

An 8% yield may still be viable — but only if the wider numbers stack up. Your financing, tax planning, operational efficiency, and future outlook all play vital roles in whether an investment works for you. There is no one-size-fits-all figure anymore.

The best decisions are made with clarity, not assumption. Whether you're reviewing your existing portfolio, considering a new purchase, or just starting your investment journey, having the proper support makes all the difference.

At Stewarts Estates, we take pride in helping landlords make informed, confident choices, backed by local market expertise and a proactive approach to property management.

Let's discuss your next steps