Rental Property Yield Calculator
Calculate your investment property's return on investment (ROI) instantly.
How to Calculate Rental Yield
Rental yield is a key metric for real estate investors to evaluate the potential return of a residential or commercial property. It is expressed as a percentage and helps compare different properties regardless of their size or location.
Gross Yield vs. Net Yield
Gross Rental Yield: This is the simplest calculation. It is the annual rental income divided by the property purchase price. It does not account for any expenses like taxes or repairs.
Net Rental Yield: This is a more accurate representation of your profit. It takes the annual rental income, subtracts all annual operating expenses (maintenance, insurance, property taxes, management fees), and divides that figure by the total investment cost (purchase price plus closing costs).
Practical Example
Imagine you purchase a property for $400,000 with $20,000 in closing costs. You rent it out for $2,500 per month. Your annual expenses (taxes, insurance, and repairs) total $6,000.
- Total Investment: $420,000
- Annual Rent: $30,000 ($2,500 x 12)
- Gross Yield: ($30,000 / $400,000) * 100 = 7.5%
- Net Yield: ($30,000 – $6,000) / $420,000 * 100 = 5.71%
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 5-8% is considered healthy. In higher-risk or emerging markets, investors often look for 8-12% to compensate for potential vacancy rates or lower capital appreciation.