Rental Yield Calculator
Calculate your property's ROI and determine if a rental investment is profitable.
Understanding Rental Yield for Property Investors
Rental yield is one of the most critical metrics for real estate investors. It measures the annual return on a property investment as a percentage of the property's value. Unlike capital gains (which focus on the increase in property price), rental yield focuses on the cash flow generated by the asset.
Gross Yield vs. Net Yield
Gross Rental Yield: This is the total return before any expenses are deducted. It is a quick way to compare different properties, but it can be misleading because it doesn't account for the costs of owning the property.
Net Rental Yield: This is a more accurate representation of your profit. It takes the annual rent, subtracts all ownership expenses (maintenance, property management fees, insurance, and taxes), and then divides that by the purchase price.
Suppose you buy a property for $400,000. You rent it out for $2,000 per month. Your annual expenses (taxes, repairs) total $5,000.
1. Annual Income: $2,000 x 12 = $24,000
2. Gross Yield: ($24,000 / $400,000) * 100 = 6.00%
3. Net Yield: (($24,000 – $5,000) / $400,000) * 100 = 4.75%
What is a "Good" Rental Yield?
While "good" is subjective and depends on the location, most seasoned investors look for a gross rental yield of at least 5% to 8% in urban areas. In high-growth regions, yields might be lower (2-4%) because investors are betting more on capital appreciation than monthly cash flow.