Rental Yield & ROI Calculator
Gross Annual Rent:
Gross Rental Yield:
Net Rental Yield:
Annual Cash Flow (Net):
Cash-on-Cash Return (ROI):
How to Calculate Rental Yield and ROI
Understanding the difference between Gross Yield, Net Yield, and Return on Investment (ROI) is critical for any real estate investor. While a property might look profitable on paper due to high rent, hidden expenses can quickly erode your margins.
This calculator helps you break down the numbers using three primary formulas:
- Gross Rental Yield: (Annual Rent / Purchase Price) × 100. This is a quick "back-of-the-envelope" calculation to compare different properties.
- Net Rental Yield: ((Annual Rent – Annual Expenses) / Purchase Price) × 100. This provides a more accurate picture by accounting for taxes, insurance, and maintenance.
- Cash-on-Cash Return (ROI): (Annual Net Cash Flow / Total Cash Invested) × 100. This measures the return on the actual money you out of pocket, rather than the total property value.
Real-World Investment Example
The Property: A condo purchased for $300,000.
Income: Monthly rent is $2,000 ($24,000 annually).
Expenses: Property taxes, HOA fees, and insurance total $6,000 per year.
Investment: You put down 20% plus closing costs, totaling $75,000 in cash.
The Result:
Gross Yield: 8%
Net Yield: 6%
ROI: 24% (Annual Net Profit of $18k / $75k Investment)
Key Factors Affecting Your Returns
When using the rental yield calculator, remember to include these commonly overlooked expenses in your "Annual Operating Expenses" field:
- Vacancy Rate: Always budget for at least 5% vacancy (roughly 2-3 weeks per year).
- Property Management: Usually 8-10% of monthly rent if you aren't managing it yourself.
- Maintenance Reserve: A standard rule is setting aside 1% of the property value per year for repairs.
- Insurance & Taxes: These often rise annually; ensure you are using current local rates.