Property Rental Yield Calculator
Calculate your gross and net investment returns instantly.
What is Rental Yield?
Rental yield is a critical financial metric used by real estate investors to evaluate the potential return on a property investment. It measures the annual rental income generated by a property as a percentage of its total value or cost. Understanding the difference between gross and net yield is essential for making informed investment decisions.
Gross vs. Net Rental Yield
Gross Rental Yield: This is the simplest calculation. It takes your total annual rent and divides it by the property price. While useful for a quick comparison between properties, it doesn't account for the costs of running the investment.
Net Rental Yield: This is a more accurate representation of your profit. It subtracts all annual expenses (such as maintenance, property management fees, insurance, and taxes) from the annual rent before dividing by the property cost. A net yield gives you the "real" return on your capital.
Calculation Example
Imagine you purchase a property for $500,000 with $10,000 in closing costs (Total: $510,000). You rent it out for $2,500 per month ($30,000 per year).
- Gross Yield: ($30,000 / $500,000) × 100 = 6.0%
- Expenses: If annual expenses are $5,000, your net income is $25,000.
- Net Yield: ($25,000 / $510,000) × 100 = 4.9%
What is a Good Rental Yield?
While "good" varies by location and property type, most investors aim for a gross yield between 5% and 8% in urban areas. In high-growth locations, yields might be lower (2-4%) because investors expect the property value itself to increase significantly over time (capital appreciation).