Investment Property Rental Yield Calculator
Calculate Gross and Net Yield to evaluate your real estate investment.
Purchase Details
Income & Expenses
(Taxes, Insurance, HOA, Repairs)
Understanding Rental Yield: A Guide for Real Estate Investors
Rental yield is the most critical metric for property investors to determine if a specific real estate deal is profitable. It represents the annual return on your investment, expressed as a percentage of the property's value or cost.
Gross Yield vs. Net Yield
Gross Rental Yield is a simple calculation that compares the total annual rent to the property purchase price. It is useful for a quick initial screening of properties.
Formula: (Annual Rent / Purchase Price) x 100
Net Rental Yield is a much more accurate reflection of profitability. It accounts for all the costs associated with owning and managing the property, including taxes, insurance, maintenance, and management fees. It also includes "total acquisition cost" (price + closing costs) rather than just the price.
Formula: ((Annual Rent – Annual Expenses) / Total Investment Cost) x 100
What is a Good Rental Yield?
While "good" varies by market, most investors target specific benchmarks:
- 3% – 5%: Common in high-appreciation metropolitan areas (e.g., New York, London). Low cash flow, but high capital growth potential.
- 5% – 8%: Generally considered a solid return for balanced markets.
- 8%+: Excellent yield, usually found in emerging markets or regions with lower property prices but steady rental demand.
Example Calculation
Let's say you buy a property for $400,000 with $20,000 in closing costs. You rent it for $2,500 per month ($30,000/year). Your annual expenses (tax, insurance, repairs) are $6,000.
- Gross Yield: ($30,000 / $400,000) = 7.5%
- Net Yield: ($30,000 – $6,000) / ($400,000 + $20,000) = 5.7%