Property Rental Yield Calculator
Calculate your potential return on investment for rental properties.
What is Rental Yield?
Rental yield is a key metric used by real estate investors to evaluate the profitability of an investment property. It measures the annual rental income of a property as a percentage of its total value or purchase price. Understanding the difference between gross and net yield is crucial for making informed investment decisions.
Gross vs. Net Rental Yield
Gross Rental Yield is the simplest calculation. It is calculated by taking the total annual rent and dividing it by the property purchase price. It does not account for expenses like taxes, maintenance, or property management fees.
Net Rental Yield provides a more accurate picture of your ROI. It subtracts all operating expenses (maintenance, insurance, vacancy costs, and taxes) from the annual rent before dividing by the purchase price.
How to Use This Calculator
- Purchase Price: Enter the total price paid for the property including closing costs.
- Monthly Rent: The expected rent you will collect from tenants each month.
- Annual Expenses: Include property taxes, homeowners association (HOA) fees, insurance premiums, and estimated repair costs.
- Vacancy Rate: Realistically, a property won't be occupied 365 days a year. A common standard is 5% to 10%.
Example Calculation
Imagine you buy a property for $300,000. You rent it out for $2,000 per month. Your annual expenses (taxes, insurance, maintenance) total $4,000, and you factor in a 5% vacancy rate.
- Annual Income: $2,000 x 12 = $24,000
- Adjusted Income (5% vacancy): $22,800
- Gross Yield: ($24,000 / $300,000) * 100 = 8.00%
- Net Yield: (($22,800 – $4,000) / $300,000) * 100 = 6.27%
Most investors look for a net yield between 5% and 8% depending on the location and property type.