Rental Yield Calculator
Calculate your property investment's gross and net ROI instantly.
What is Rental Yield and Why Does It Matter?
Rental yield is a primary metric used by real estate investors to evaluate the potential profitability of a residential or commercial property. It measures the annual rental income as a percentage of the property's total value or cost.
Understanding the difference between Gross Yield and Net Yield is crucial for long-term financial planning. While gross yield provides a quick "rule of thumb," net yield gives you the actual cash flow reality by accounting for expenses like property taxes, maintenance, and insurance.
How to Calculate Rental Yield
The formulas used in this calculator are standard industry benchmarks:
- Gross Rental Yield: (Annual Rent / Purchase Price) x 100
- Net Rental Yield: ((Annual Rent – Annual Expenses) / Total Investment Cost) x 100
Real-World Example
Imagine you buy a condo for $400,000 with $10,000 in closing costs. You rent it for $2,200 per month ($26,400 per year). Your annual expenses (tax, HOA, repairs) are $5,000.
- Gross Yield: ($26,400 / $400,000) = 6.6%
- Net Yield: (($26,400 – $5,000) / $410,000) = 5.22%
Factors That Influence Your Yield
Several variables can shift your rental yield over time. Location is the most significant factor; high-demand urban areas often have lower yields because property prices are very high, whereas emerging markets might offer higher yields but carry more risk.
Investors should also consider vacancy rates. If a property sits empty for one month a year, your yield effectively drops by 8.3%. Always build a "vacancy buffer" into your annual expense estimates to ensure your investment remains viable.