Rental Property Yield Calculator
Analyze your real estate investment profitability in seconds.
Understanding Rental Yield for Property Investors
Rental yield is the primary metric used by real estate investors to evaluate the potential return on a property investment. Unlike capital gains, which focus on the increase in property value over time, rental yield focuses on the immediate cash flow generated by the asset.
Gross Yield vs. Net Yield
Gross Rental Yield: This is the simplest calculation. It is the total annual rent divided by the purchase price. It provides a quick "rule of thumb" but ignores the costs of owning property.
Formula: (Annual Rent / Purchase Price) x 100
Net Rental Yield: Also known as the capitalization rate (Cap Rate), this is the most accurate reflection of profitability. It subtracts expenses like property taxes, insurance, management fees, and maintenance from the total income.
Formula: [(Annual Rent – Expenses) / Purchase Price] x 100
Example Calculation
If you purchase a condo for $350,000 and rent it out for $2,100 per month, your gross annual rent is $25,200. This results in a Gross Yield of 7.2%. However, after accounting for $4,500 in annual taxes/insurance and a 5% vacancy rate ($1,260), your net income drops to $19,440. This brings your Net Yield to 5.55%.
What is a "Good" Rental Yield?
Benchmarks vary by location. In stable metropolitan areas, a net yield of 4-6% is often considered strong. In emerging markets or rural areas, investors may look for 8-10% to compensate for higher risks and slower appreciation. Always remember to factor in the local market vacancy rates and potential maintenance costs for older buildings.