Rental Yield Calculator
Calculate Gross and Net returns on your real estate investment
Investment Summary
Gross Rental Yield
0.00%
Net Rental Yield
0.00%
Annual Cash Flow
$0.00
Total Annual Expenses
$0.00
Understanding Rental Yield: A Complete Guide for Investors
For real estate investors, calculating rental yield is the most fundamental step in evaluating the potential profitability of a buy-to-let property. Unlike capital appreciation, which focuses on the increase in property value over time, rental yield measures the immediate cash return on your investment.
Gross vs. Net Rental Yield
Our calculator provides two distinct metrics to help you analyze your deal from different perspectives:
- Gross Rental Yield: This is the simplest calculation. It is your annual rent divided by the purchase price of the property. It is a good "quick check" metric but ignores the costs of owning property.
- Net Rental Yield: This is a more accurate representation of your actual earnings. It takes into account your total investment (purchase price + closing costs) and subtracts all operating expenses (maintenance, insurance, taxes, and management fees) from the annual rent.
Calculation Formulas Used
Gross Yield = (Annual Rent / Purchase Price) x 100
Net Yield = [(Annual Rent – Annual Expenses) / (Purchase Price + Closing Costs)] x 100
Realistic Example
Imagine you purchase a condo for $400,000 with $20,000 in closing costs and renovations. You rent it for $2,500 per month ($30,000/year). Your monthly expenses (HOA, taxes, insurance) total $500 per month ($6,000/year).
- Gross Yield: ($30,000 / $400,000) = 7.5%
- Net Yield: ($30,000 – $6,000) / ($400,000 + $20,000) = 5.71%
As seen in this example, the net yield is significantly lower but offers the true picture of what goes into your pocket at the end of the year.
What is a "Good" Rental Yield?
Generally, investors aim for a Net Yield of 5% to 8%. However, this varies by location. In high-demand urban centers like New York or London, yields may be lower (3-4%) because investors rely more on capital growth. In emerging markets or smaller towns, yields might exceed 10% to compensate for higher risks or slower appreciation.