Every listing I look at goes through the same gate: 8% gross yield, 15% return on the money in, £250 a month left after costs, and the house ready to let as it stands.
This week I added a second half to the test, and it changed almost everything. Because a house can clear the yield gate and still be full market value — and if you buy at market value, the yield you bought is the yield you are stuck with.
**Eight houses passed the yield gate this week. I checked all eight against what has actually sold on their own streets. Two survived.**
The one that killed most of them
One house passed comfortably — 16% gross, 22% return on cash, £528 a month clear. Good numbers. Then I pulled the sold prices for its own street: six sales in three years, median £38,200. The asking price was £73,000. It is 91% above the street it sits on, and the rent the agent had quoted looked like a room-by-room figure rather than a whole house.
Two three-beds in a former colliery village in Gateshead had the same problem in miniature: asking £60,000 against five sales on that street with a median of £50,000. Twenty per cent above. Both cleared the yield gate. Both were expensive.
And one house I simply dropped: nothing has sold on that street in three years, so there is no comparable at all. Without sold evidence you cannot prove the value, and I would rather say so than guess.
The two that survived
A house in Bishop Auckland at £54,950, against three street sales with a median of £70,000. That is 21.5% below the median, and below the cheapest of the three as well. A real discount.
A two-bed in the same Gateshead village at £45,000, against those same five sales and a median of £50,000. Ten per cent below, and the street is well evidenced. It is the smaller discount, but it is the one I would back with more confidence, because five sales in three years is a street you can actually read.
The rent claim I would have believed, and still didn’t buy
One agent advertised a house at “offers over £79,950” with “around 10% yield”. I checked. The nearest three-bed lettings to that street are £690 to £700 a month — and on £696 the gross yield really is 10.4%. His claim was honest.
It still fails, and here is why. Take off 12% management, £40 insurance, £50 maintenance and a 75% mortgage at 5.5%, and you are left with £248 a month — two pounds under the £250 the brief needs — and a return on the buyer’s cash of 9.7%, not 15%. On the same day, another agent advertised £800 a month and “12% yield” on a house in Hartlepool where the two nearest three-bed lettings let at £675, and where the vendor’s own works quote added £6,500 to the bill.
**Gross yield is a headline. Net is the number that decides whether you can hold the house for ten years.**
And my own correction
I got a street wrong this week. I told an investor the median sold price on a street in East Cleveland was £62,250 and that there was almost no equity in it. The full set is eight sales in twenty months, median £69,250, so the house was nearer 13% below the street than 4%. He had the correction the same day, in writing, with the working shown.
That is how I would want to be treated if I were buying. If a number I give you turns out to be wrong, you will hear it from me and not discover it yourself.
The one thing to take from this
Ask for the sold prices on the actual street before you ask for the rent. A street that has traded eight times in twenty months is a street you can value. A street with nothing on it for three years is a guess dressed up as a comparable — and I will tell you when a deal is a guess.
Sold prices are HM Land Registry Price Paid data. Rents are live local lettings checked the same day. Streets, addresses and agents come with the sourcing agreement.