Rental Yield Calculator
Calculate your property investment potential in seconds.
Investment Analysis
Understanding Rental Yield for Property Investors
Rental yield is the primary metric real estate investors use to evaluate the income potential of a buy-to-let property. Unlike capital appreciation, which focuses on the property's value increase over time, rental yield focuses on the immediate cash flow generated by the asset.
Gross Yield vs. Net Yield
Gross Rental Yield is the simplest calculation. It is the annual rental income divided by the property purchase price. While useful for quick comparisons, it doesn't account for the costs of owning the property.
Net Rental Yield is a much more accurate reflection of your return. It takes your annual income and subtracts all operating expenses—including property taxes, insurance, maintenance, management fees, and vacancy allowances—before dividing by the purchase price.
How to Use This Calculator
To get an accurate result, follow these steps:
- Purchase Price: Enter the total price paid for the property, including closing costs if you want a more precise ROI figure.
- Monthly Rent: Enter the market rate rent you expect to collect.
- Annual Expenses: Sum up your expected yearly costs. Typically, maintenance should be 1% of the property value, plus insurance and local property taxes.
- Vacancy Rate: Realistically, properties are not occupied 365 days a year. A 5% vacancy rate (about 2-3 weeks per year) is a standard industry benchmark.
Example Calculation
Imagine you purchase a condo for $300,000. You rent it out for $2,000 per month.
- Annual Gross Rent: $24,000
- Gross Yield: ($24,000 / $300,000) = 8%
- If annual expenses (taxes, repairs, insurance) are $5,000 and vacancy is $1,200 (5%):
- Annual Net Income: $17,800
- Net Yield: ($17,800 / $300,000) = 5.93%
Most professional investors target a net yield of 5-8% depending on the location and risk profile of the asset.