Discount or Yield? Which Matters More?

I get asked this question all the time. Which should I be looking for more, a property with a discount or a property with a high yield?

Well of course we would like both but it’s quite rare to find that. And even if we achieve both, it might not actually be a good purchase for other reasons that may have not been considered.

Ultimately they serve different purposes and will shape the success of your portfolio in different ways.

Let’s look at both sides.

Understanding Discount

A discount simply means buying a property below its market value. For example, if a home is worth £250,000 and you purchase it for £225,000, you create £25,000 of equity from day one.

This built in margin can protect you if prices fall (albeit extremely unlikely given the constraints of current supply and demand in the UK property market), it can give you flexibility when refinancing and it also means you are more likely to sell it in the future and make a capital gain.

Investors who target discounts are usually focused on either selling within a 1-2 year period in order to make a capital gain or holding longer term and refinancing to extract the equity and build their portfolio further. However, a discount alone is not enough.

A property that cannot rent easily or has high running costs, or insufficient income to cover the mortgage payments will quickly lose its appeal, no matter how cheap it was to buy.

Understanding Yield

Yield measures the income your property generates in relation to its purchase price. It is usually calculated in two ways:

• Gross yield: (Annual rent ÷ Purchase price) × 100

• Net yield: (Annual rent minus costs ÷ Purchase price) × 100

  
  

Net yield is a more realistic figure because it takes into account costs like maintenance, insurance, void periods and letting fees.

In 2025, average gross yields across the UK are around 5.3%, with some northern cities still achieving 6-7 % or occasionally more in secondary locations.

Yields between 5 and 8% are typically considered healthy for most buy to let investors.

Why Yield Matters

Yield gives your portfolio several benefits. It provides:

1. Consistent cash flow that covers mortgage payments, maintenance and management costs.

2. Surplus income that you can use to enhance other areas of your life, such as topping up your retirement funds.

3. Protection against market fluctuations since income continues even when property values stall.

4. Reinvestment potential, allowing you to build capital for your next property purchase.

5. Lender confidence, since banks often prefer assets with strong, predictable income streams, it supports future borrowing capability.

   
   

For new investors, focusing on yield is often regarded as the most reliable and safest way to grow. A strong yield keeps your finances stable and helps you move toward financial independence.

Why Discount Still Has Value

A discount creates immediate equity and a safety margin. It gives you more control when refinancing and can accelerate growth if property values rise. It also improves leverage potential because your equity position is stronger.

However, a discount without income can quickly become a liability. If a property remains empty or produces low rent, the discount does not help your cash flow or your long term returns.

Balancing Both

In reality, successful investors pay attention to both figures. A balance between discount and yield usually produces the best long term results. A property that offers a moderate discount and a steady 6 percent yield will almost always outperform a property that looks like a bargain but does not rent well.

When analysing any deal, calculate both the discount on purchase and the ongoing yield after costs. That combination helps you make objective decisions rather than emotional ones.

It Also Depends On The Market

Discounts aren’t always an option. When the market was booming back in 2020-2021, negotiating discounts on property prices was practically impossible because developers didn’t have to give any discount away. Investors and owner occupiers were queuing up to make purchases.

But fast forward to 2025 and the market is much cooler. There are no longer any queues. There are less buyers around. So should we be buying less properties because there’s less buyers around? ABSOLUTELY NOT.

We aren’t sheep. There are discounts to be had and as an investor myself, planning for the long term, I absolutely want discounts please.

Final Thoughts

If your goal is to generate consistent income and build financial stability, yield should come first. Once you have that foundation, you can begin targeting properties with strong discounts to grow equity faster.

Always remember that a property’s true value lies not just in what you pay for it, but in what it can earn for you.

Sacks Properties is committed to being your go-to partner in the UK property market, helping you build wealth through exclusive, high-yield opportunities. We provide complete support from start to finish, expanding your network of investors and developers.

Exciting times are here!