Calculate Gross and Net Rental Yields for Real Estate Investment
Please enter valid positive numbers for price and rent.
Gross Rental Yield:0.00%
Net Rental Yield (Cap Rate):0.00%
Annual Gross Income:$0.00
Total Annual Expenses:$0.00
Net Operating Income (NOI):$0.00
function calculateRentalYield() {
// Get input values
var price = parseFloat(document.getElementById('propertyPrice').value);
var rent = parseFloat(document.getElementById('monthlyRent').value);
var taxes = parseFloat(document.getElementById('annualTaxes').value) || 0;
var insurance = parseFloat(document.getElementById('annualInsurance').value) || 0;
var maintenance = parseFloat(document.getElementById('annualMaintenance').value) || 0;
var vacancy = parseFloat(document.getElementById('vacancyRate').value) || 0;
var errorDiv = document.getElementById('error-message');
var resultsDiv = document.getElementById('results-display');
// Validation
if (isNaN(price) || isNaN(rent) || price <= 0 || rent <= 0) {
errorDiv.style.display = 'block';
resultsDiv.style.display = 'none';
return;
}
errorDiv.style.display = 'none';
// Calculations
var annualRent = rent * 12;
// Calculate Vacancy Loss
var vacancyLoss = annualRent * (vacancy / 100);
// Effective Gross Income
var effectiveGrossIncome = annualRent – vacancyLoss;
// Total Expenses
var totalExpenses = taxes + insurance + maintenance;
// Net Operating Income (NOI)
var noi = effectiveGrossIncome – totalExpenses;
// Gross Yield Formula: (Annual Rent / Property Price) * 100
var grossYield = (annualRent / price) * 100;
// Net Yield Formula: (NOI / Property Price) * 100
var netYield = (noi / price) * 100;
// Display Results
document.getElementById('grossYieldResult').innerHTML = grossYield.toFixed(2) + '%';
document.getElementById('netYieldResult').innerHTML = netYield.toFixed(2) + '%';
document.getElementById('annualGrossResult').innerHTML = '$' + annualRent.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalExpensesResult').innerHTML = '$' + (totalExpenses + vacancyLoss).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + ' (incl. vacancy)';
document.getElementById('noiResult').innerHTML = '$' + noi.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
resultsDiv.style.display = 'block';
}
Understanding Rental Yield: A Guide for Investors
Rental yield is one of the most critical metrics for real estate investors. It measures the return on investment (ROI) generated by a property's rental income relative to its purchase price. Whether you are buying a buy-to-let property or analyzing your current portfolio, understanding the difference between Gross Yield and Net Yield is essential for making informed financial decisions.
What is Gross Rental Yield?
Gross rental yield is the simplest calculation used to compare properties quickly. It looks solely at the income generated by the property against the cost to acquire it, without factoring in expenses.
Formula: (Annual Rental Income / Property Value) × 100
For example, if you buy a property for $250,000 and it rents for $2,000 per month ($24,000 annually), the gross yield is ($24,000 / $250,000) × 100 = 9.6%.
What is Net Rental Yield?
Net rental yield provides a much more accurate picture of your actual return because it accounts for the costs associated with owning the property. This is often referred to as the "Cap Rate" (Capitalization Rate) in commercial real estate.
Vacancy costs (periods where the property sits empty)
Property management fees
Example Calculation
Using the same $250,000 property with $24,000 annual rent, let's assume your annual expenses (taxes, insurance, maintenance) total $5,000 and you account for a 5% vacancy rate ($1,200).
Effective Income: $24,000 – $1,200 = $22,800
Net Operating Income (NOI): $22,800 – $5,000 = $17,800
Net Yield: ($17,800 / $250,000) × 100 = 7.12%
As you can see, the Net Yield (7.12%) is significantly lower than the Gross Yield (9.6%), which is why calculating expenses is vital for cash flow analysis.
What is a "Good" Rental Yield?
A "good" rental yield varies by location and property type. generally, a net yield between 5% and 8% is considered solid for residential properties. Yields above 8% are often found in lower-cost areas or multi-family units but may carry higher risks. Lower yields (3-4%) are common in high-appreciation areas where investors bank on the property value increasing over time rather than immediate cash flow.