Rental Yield Calculator
Gross Rental Yield:
0.00%
Net Rental Yield:
0.00%
Annual Net Cash Flow:
$0.00
Monthly Net Cash Flow:
$0.00
What is Rental Yield?
Rental yield is a crucial metric for real estate investors that measures the annual return on a property investment as a percentage of its cost. Unlike capital growth, which tracks the increase in a property's value over time, rental yield focuses specifically on the income-generating potential of the asset.
Gross Yield vs. Net Yield
It is vital to distinguish between Gross and Net yields to avoid overestimating your returns:
- Gross Rental Yield: This is the simplest calculation. It is the total annual rent divided by the purchase price. It does not account for expenses like taxes, maintenance, or management fees.
- Net Rental Yield: This provides a more realistic view of your investment. It calculates the annual rent minus all operating expenses, divided by the total investment (purchase price plus closing costs and initial renovations).
Example Calculation:
If you buy a house for $300,000 and spend $10,000 on closing costs, your total investment is $310,000.
If the rent is $2,000/month ($24,000/year) and your annual expenses (taxes/insurance) are $4,000:
– Gross Yield: ($24,000 / $300,000) = 8.0%
– Net Yield: (($24,000 – $4,000) / $310,000) = 6.45%
If you buy a house for $300,000 and spend $10,000 on closing costs, your total investment is $310,000.
If the rent is $2,000/month ($24,000/year) and your annual expenses (taxes/insurance) are $4,000:
– Gross Yield: ($24,000 / $300,000) = 8.0%
– Net Yield: (($24,000 – $4,000) / $310,000) = 6.45%
How to Use This Calculator
- Property Purchase Price: Enter the agreed-upon sale price of the property.
- Renovation & Closing Costs: Include stamp duty, legal fees, and immediate repairs needed to make the property tenant-ready.
- Monthly Rent: Enter the expected or current monthly rental income.
- Annual Operating Expenses: Include property taxes, insurance, HOA fees, property management fees (usually 8-10% of rent), and a small buffer for maintenance (1% of property value per year).
What is a "Good" Rental Yield?
A "good" yield depends on the location and property type. Generally, in stable urban markets, a net yield of 5% to 8% is considered strong. Higher yields often come with higher risks, such as lower capital growth potential or higher tenant turnover in lower-income areas.