London buy-to-let investment delivers strong long-term returns when acquisitions are made with clear-eyed analysis of the numbers. Headline yields are frequently misleading, and the difference between a well-performing and a poorly performing investment often comes down to factors that are invisible in a Rightmove listing.

This guide covers the key metrics and practical considerations for buyers assessing residential investment opportunities across Greater London.

• Gross yield tells you nothing about running costs, void periods, or financing — always calculate net yield
• New development stock typically commands a rental premium over older comparable stock, supporting stronger yields on a like-for-like basis
• Service charge levels are a material cost for leasehold investment properties and should always be factored into yield calculations

Calculating net yield

Gross yield is calculated by dividing the annual gross rent by the purchase price. A property purchased for £700,000 generating £2,800 per month in rent has a gross yield of 4.8%. But gross rent is not what the landlord keeps. Service charges, ground rent, lettings management fees, insurance, and void periods must all be deducted to arrive at net income.

In London, service charges on new development leasehold properties typically run from £3 to £10 per sq ft per annum, representing a material cost on any investment. A 900 sq ft apartment with a service charge of £6 per sq ft adds £5,400 per annum to the running costs before any other expenses are counted. When lettings management fees of 10% to 12% of annual rent are added, a 4.8% gross yield can reduce to a net yield of 3.2% to 3.6%.

• Request the most recent service charge accounts and budget from the vendor before proceeding
• Verify the ground rent level and any review mechanism — onerous ground rent terms can affect mortgage availability and resaleability
• Obtain three years of actual rental history where the property is an established investment, not just the agent's current market appraisal

Location and rental demand

Rental demand in London is determined primarily by proximity to employment centres, transport connectivity, and the quality of the local amenity offer. New development in well-connected inner London locations consistently outperforms older stock in terms of void periods and tenant quality, partly because of the specification and partly because of the amenity offer that newer buildings typically provide.

• Elizabeth line connectivity has materially improved rental demand and values in corridors including Shoreditch, Whitechapel, and Canary Wharf
• Corporate letting demand is strongest within 15 minutes of major employment centres in the City, Canary Wharf, and the West End
• Studio and one-bedroom apartments consistently outperform larger units on a yield basis in prime inner London locations

"The best London buy-to-let investment is not necessarily the one with the highest gross yield. It is the one with sustainable rental demand, manageable running costs, and a credible path to capital appreciation over the holding period."