This is a question we are asked a lot by new landlords. In truth there is no hard and fast rule as to what a good rental yield is, as returns will depend on many factors; the location of your property, its desirability, competition and demand and the amount needed to be spent to get it to a suitable condition.
As a very general rule, a rental yield of 7% on a residential property is considered very good, while commercial properties can be slightly higher from 8% upwards, but there are more costs involved with letting commercial property. These costs are offset by longer rental periods, as these leases typically range from two years to 10 years, and in many cases the tenants will be responsible for maintenance of the property.
Landlords must also factor extra costs into their budget. Monthly rent should be able to cover the running costs of the property as well as mortgage payments, but it should also make enough profit to build up an emergency fund should something happen at the property such as a broken boiler, as well as covering any periods when the building may be unoccupied- during an end of tenancy for example.