Rental Property Yield Calculator
Calculate your real estate investment ROI in seconds
Investment Analysis
Understanding Your Property Rental Yield
Rental yield is a critical metric for real estate investors to evaluate the potential return on a property investment. Unlike capital appreciation, which focuses on the property's increase in value over time, yield focuses on the immediate income-generating potential.
Gross Yield vs. Net Yield
Gross Rental Yield: This is the total annual rent collected divided by the purchase price of the property. It provides a quick snapshot of the property's earning potential before any expenses are considered.
Net Rental Yield: This is a more accurate figure for serious investors. It subtracts all operating costs—such as property management fees, insurance, maintenance, and vacancy periods—from the annual income before dividing by the purchase price.
Example Calculation
- Property Price: $500,000
- Monthly Rent: $3,000 ($36,000 annually)
- Annual Expenses: $6,000
- Gross Yield: ($36,000 / $500,000) * 100 = 7.2%
- Net Yield: (($36,000 – $6,000) / $500,000) * 100 = 6.0%
What is a "Good" Rental Yield?
In most stable markets, a net rental yield between 5% and 8% is considered healthy. However, this varies significantly based on location, property type (residential vs. commercial), and the current interest rate environment. Always ensure your net yield comfortably covers your mortgage interest if you are financing the investment.