Rental Property Yield & ROI Calculator
Include insurance, taxes, maintenance, and management fees.
Investment Results:
Gross Rental Yield
Net Rental Yield
Annual Rental Income
Annual Cash Flow (NOI)
Understanding Rental Property Yield for Real Estate Investors
When investing in real estate, calculating your rental yield is the most effective way to determine if a property is a profitable investment. Unlike property appreciation, which is speculative, rental yield focuses on the tangible cash flow generated by the asset.
What is Gross Rental Yield?
Gross rental yield is the total annual rent divided by the purchase price of the property. It provides a quick "snapshot" of the property's potential but does not take into account the costs associated with running the property.
Formula: (Annual Rental Income / Purchase Price) x 100
The Importance of Net Rental Yield
Net rental yield is a more accurate metric because it factors in your operating expenses. This includes property taxes, insurance, repairs, vacancy rates, and management fees. A property might have a high gross yield, but if the maintenance costs are astronomical, the net yield could be lower than a cheaper property in better condition.
Formula: ((Annual Rental Income – Annual Expenses) / Purchase Price) x 100
Example Calculation
Imagine you purchase a property for $400,000. You lease it out for $2,500 per month. Your annual expenses (taxes, insurance, minor repairs) total $6,000.
- Annual Rent: $2,500 x 12 = $30,000
- Gross Yield: ($30,000 / $400,000) x 100 = 7.5%
- Net Income: $30,000 – $6,000 = $24,000
- Net Yield: ($24,000 / $400,000) x 100 = 6%
What is a Good Rental Yield?
Generally, a "good" yield depends on the location and property type. In stable metropolitan areas, a net yield of 4-6% is often considered strong. In emerging markets or higher-risk areas, investors typically look for yields of 7-10% to compensate for the added risk and lower potential for capital appreciation.