Landlords
Is your rental paying its way? Yield, interest cover and stress tests
Last updated 16 October 2026
Three numbers tell a landlord most of what matters: yield after costs, interest cover and loan-to-value. How to work them out and stress-test them.
A rental can look profitable on the rent alone and still cost you money once costs, interest and empty months are counted. These measures help you see where each property stands, before tax.
The measures
- Gross yield (before costs): a year's rent divided by the property's value.
- Net yield (after costs): rent after vacancy and running costs (management, maintenance, insurance, Local Property Tax (LPT)), divided by the value. It shows what the property earns before finance.
- Interest cover: net rental income divided by the mortgage interest. Below 1, the rent doesn't cover the interest.
- Loan-to-value: mortgage balance divided by value. Central Bank rules cap new buy-to-let lending at 70%.
An example
Take an apartment worth €350,000 with a €250,000 mortgage at 4.2%, let at €2,200 a month. Costs are 8% management, €3,500 maintenance and €500 insurance, and it is empty for about 5% of the year. LPT is estimated from the value at the basic rate.
| Rent a year | €26,400.00 |
| Rent after empty weeks | €25,080.00 |
| Running costs | (€6,339.40) |
| Net operating income | €18,740.60 |
| Mortgage interest | (€10,500.00) |
| Cash flow before tax and capital | €8,240.60 |
| Cash flow if rates rise 2 points and it's empty a month | €2,511.96 |
Gross yield 7.5%, net yield 5.4%, interest cover 1.78times, loan-to-value 71.4%.
Stress-test it
Lenders must test whether borrowers could afford a rate 2 percentage points higher (unless fixed for five years or more). Running the same test on your rental, plus a few empty months, shows whether it would still cover its costs. See the mortgage stress test.
Then tax
Cash flow here is before income tax, and before repaying mortgage capital, which isn't deductible. Tax is charged on rent less allowable costs, including interest, at your top rate. A property with positive cash flow can still cost you money after tax and capital repayments. Work out the tax with the landlord tax guide.
Work it out
Sources
- Central Bank of Ireland: Mortgage measures (loan-to-income 4x / 3.5x, deposits 10% / 30%) (checked 24/10/2026)
- Revenue: LPT valuation bands and rates 2026–2030, and 2026 local adjustment factors (checked 25/10/2026)
General information, not tax advice. HeyPenny is not a tax agent.