Rental Yield Calculator
Calculate your property investment returns in seconds.
What is Rental Yield?
Rental yield is a key metric used by real estate investors to measure the annual return on a property investment. It is expressed as a percentage of the property's value. Understanding your yield helps you compare different investment opportunities and determine if a property will generate enough cash flow to cover its costs.
Gross Yield vs. Net Yield
Gross Rental Yield: This is the simplest calculation. It looks at the total annual rent received before any expenses are deducted. While useful for a quick comparison, it doesn't provide the full financial picture.
Net Rental Yield: This is a more accurate reflection of your return. It subtracts all operating expenses—such as property management fees, maintenance, insurance, and property taxes—from the annual rent before dividing by the total investment cost.
The Formula
To calculate yield manually, use these formulas:
- Gross Yield = (Annual Rental Income / Property Value) × 100
- Net Yield = ([Annual Rental Income – Annual Expenses] / Total Investment Cost) × 100
If you buy a condo for $500,000 and rent it out for $2,500 per month, your annual income is $30,000.
– Gross Yield: ($30,000 / $500,000) × 100 = 6.0%.
If your annual expenses (taxes, fees) are $5,000:
– Net Yield: (($30,000 – $5,000) / $500,000) × 100 = 5.0%.
What is a Good Rental Yield?
Generally, a gross rental yield between 5% and 8% is considered healthy in many urban markets. However, this varies significantly by location. High-growth areas may have lower yields (2-4%) because investors expect the property value to increase over time (capital appreciation), whereas stable, lower-cost areas might offer yields of 10% or more.