Operational Yield
Compare owner-operated returns against a leased structure.
Introduction
Who this is for: Investors deciding between operating an asset and leasing it to an operator.
Why it matters: Owning and operating captures the full trading profit but takes on regulatory, staffing and occupancy risk. Leasing converts that into a fixed, lower, more secure income. The yield gap between the two is the price of that risk transfer — typically 300-500 basis points.
Typical scenario: An investor deciding whether to operate a care home directly or lease it on an FRI basis.
- Comparing operational yield to investment yield without pricing the risk difference.
- Ignoring that CQC registration and liability sit with the operator, not the landlord.
- Forgetting that a leased asset is far more financeable and more liquid on exit.
Inputs
Asset & Trading
Lease Alternative
Operating Risk
Analysis
Operating directly produces £705,000 net — a 11.75% yield. Leasing at £480,000 produces £369,000, or 6.15%. The 5.60-point premium is compensation for taking operational risk; £336,000 of income depends on trading performance rather than a covenant.
This analysis provides context, not financial advice. Consult a qualified adviser before making investment decisions.
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Live Results
Operational Yield
11.75%
Leased Yield
6.15%
Premium for Operating
5.60%
Rent Cover if Leased
1.87x