ROI For Rental Property in London: How to Maximise Yields in 2026

Key Takeaways:

• The ROI for rental property remains high in London despite the implementation of the Renters’ Rights Act and the new tax obligations introduced by the 2025 Autumn Budget. 
• Flexible letting can consistently deliver higher returns compared to traditional long-term letting by reducing vacancy periods and maximising earning potential during peak seasons.
• Dynamic pricing, tenant vetting, lower vacancy rates, and complete compliance are crucial to protecting your rental property’s ROI in 2026.
• Professional property management helps minimise operating costs, keeping profit margins high.

ROI for Rental Property: Maximising Yields in London

Investing in real estate, specifically rental properties, can lead to a substantial profit for the owner. But how can you make sure you’re getting the right return on your investment?

Return on Investment (ROI) for a rental property measures the profit it generates relative to its cost, expressed as a percentage.

Understanding how to calculate and maximise the ROI for rental property is key to effective property management operations. It will tell you whether you need to push further to increase your rental income and reach your investment goals.

How to calculate ROI for rental property

Calculating the ROI of a rental property follows a simple formula.

ROI = (Annual Net Rental Income / Property Cost) x 100

• Annual Net Rental Income is the total rental income minus property operating costs. These expenses are management, compliance, utilities, and vacancy costs.
• Property Cost is the total purchase price and all costs incurred on it, including stamp duty, refurbishment, setup costs, and furnishings.

For example, if a £250,000 property earns £24,000 annually and incurs an expense of £6,000, the net rental income is £18,000. The ROI computation will be as follows:

ROI = (£18,000 / £250,000) x 100

ROI = 7.2%

This is a good ROI considering the ideal is between 5% to 8%. But if you want long-term growth, you could aim for a 10% to 12% ROI. This will give you enough room for a bigger cash flow and financial reserves for future investments.

The question is, can you get a higher ROI in the current landscape of the private rented sector (PRS) in London?

The London Private Rented Sector in 2026

London landlords expressed their concern when the Renters’ Rights Act was passed. On top of that, the higher taxation from the Autumn Budget made them question whether the London PRS is still worth it.

The answer to that is yes. It still opens a huge opportunity to earn.

Did you know:

As of September 2025, the average gross rental yield in the UK is 5.8%, while it’s 5.1% in London. – Zoopla

London continues to have one of the strongest rental markets in the world. The city will always be a popular destination for tourists and corporate travellers. This means the average rental yield will be higher than the rest of the UK, and demand for short-term accommodations will remain high.

So while the regulation and tax obligations increase the complexity of property management, profitability remains high. London landlords just have to use smarter letting strategies to stay ahead.

Tips to Maximise ROI for Rental Property Management

Maximising ROI is not just about raising rental rates or filling booking calendars. It’s about optimisation.

Here are strategies you can use to maximise ROI for your rental property this 2026.

Dynamic pricing strategies

Fixed rental fees limit your property’s revenue potential. Dynamic pricing adjusts rental rates to consider current demand, market conditions, and seasonality. This allows you to maximise earning potential during peak season and stay competitive during off-peak periods. This increases your property’s income potential without taking too much risk.

Effective tenant and guest vetting

Having quality tenants and guests reduces property damage, maintenance and repair costs, and rent arrears and disputes. All these can affect your property’s net income and ROI.

A thorough screening and vetting process will help. This includes:

• Credit and background checks to ensure financial stability and assess rental history.
• Income verification, especially for tenants, to ensure they can afford rent and won’t skip payments.
• Reference previous landlords to check reliability and behaviour.

None of these will guarantee a perfect tenant or guest, but they will give you some idea about their character.

Lower vacancy rates

Occupied rental properties increase ROI for rental properties. Use flexible letting that combines short, mid, and long-term letting to:

• Fill gaps with short-term stays
• Use mid-term letting to survive low seasons
• Minimise long vacancy periods

Minimal operating costs

Increasing the ROI of your rental property also means reducing operating costs. Keep track of all maintenance and assessments and create a regular schedule. This will minimise breakdowns and emergencies (out-of-hour services can be costly!) Take note of repairs and replacements, so you know when the next one is due.

Streamlining operations can also help you keep expenses low, which in turn keeps your profit margin high.

Property management technology

Automation and proptech play a crucial role in streamlining property operations. Data-driven tools can also help improve pricing accuracy, task-scheduling efficiency, and even occupancy forecasting.

Investing in a property management technology can help you improve occupancy rates and reduce operational costs.

Complete compliance

The changing landscape of the PRS brings real financial risks to non-compliance. You’ll face fines and penalties. It could even compromise your property’s ability to rent.

This is why you should be strict with compliance. This is not just to abide by the laws. Compliance helps your property meet local housing standards. It also keeps your property safe for the occupants.

The Role of Professional Property Management

Maximising the ROI for rental property in London is easier with the help of a professional property management company like City Relay. You get years of experience, industry expertise, and tools and resources that have been perfected over time.

With City Relay, we can help London landlords maximise rental yields through:

• Flexible letting (combination of short, mid, and long-term letting)
• In-house housekeeping and maintenance (for faster turnarounds and lower costs)
• Dynamic pricing and revenue management (using data-driven tools)
• Multi-platform marketing and property listing optimisation
• Guest and tenant communication and management (increase positive reviews and boost repeat bookings)
• End-to-end compliance management

City Relay can help you reduce inefficiencies that are compromising your ROI. With proper property management, you can avoid missed pricing opportunities, compliance risks, operational delays, and long void periods.

FAQs: ROI for Rental Property in London

Is ROI still possible in London when the RRA is implemented?

Yes. Although the RRA increased restrictions and costs, there remains strong demand for rental properties, particularly for short- and mid-term lettings. Tourists, corporate travellers, digital nomads, and relocators keep the demand high. With a well-managed property, you can continue to enjoy rental income despite the changing regulations.

Can flexible letting generate a higher ROI compared to long-term letting?

Yes. Switching between different letting models allows you to take advantage of peak season earnings while staying competitive during off-peak periods. It also brings flexibility in pricing, since your property is not tied to a single rental rate for months at a time. 

Can a property management company help increase ROI?

Yes. City Relay has the operational systems, property management technology, and industry expertise to help London landlords increase their ROI. You can rely on them to manage your property so it meets local housing standards while maximising profitability.

Be Smart in Maximising ROI for Rental Property in 2026

Maximising your property’s ROI requires you to adapt to the changing rules and regulations in London. Don’t focus on the added restrictions and costs. Pay more attention to the opportunities that remain despite all the changes.

Use this as an opportunity to try new strategies, such as flexible letting. With professional management from City Relay, flexible letting brings:

• Higher rental income potential
• Better regulatory resilience
• Lower vacancy periods
• Greater ROI and rental yields

Find out how City Relay can open opportunities for your property to increase its ROI this 2026. Let’s discuss your property’s earning potential. Get a free rental estimate now.