Rental Yield
Property rental return rate.
What does Rental Yield mean?
Rental yield measures the annual return on a property investment as a percentage of its purchase price. Gross yield uses total rent before expenses, while net yield deducts costs like maintenance, insurance, and property taxes. Higher yields indicate better cash-flow performance, but should be weighed alongside capital growth potential and risk.
How to calculate Rental Yield
Gross yield = (Annual Rent / Property Price) × 100. Net yield = ((Annual Rent − Annual Expenses) / Property Price) × 100. For example, a $500,000 property renting for $2,000/month with $5,000 in annual expenses has a gross yield of 4.80% and a net yield of 3.80%.
FAQ
A gross yield of 5–8% is generally considered good, though this varies by market. High-demand city centres may offer 3–4% with stronger capital growth, while regional areas can exceed 8%. Always compare net yield (after expenses) for a realistic picture.
Common expenses include property management fees, insurance, maintenance and repairs, council rates or property taxes, strata/HOA fees, vacancy periods, and landlord insurance. The more thorough your expense estimate, the more accurate your net yield.
Rental yield measures only the income return relative to the property price. ROI (return on investment) includes both rental income and capital gains (or losses) when you sell. A property can have modest yield but excellent ROI if its value appreciates significantly.
Use the purchase price to measure the yield on your actual investment. Use current market value to assess whether the property still delivers competitive returns compared to alternatives.
Not directly. To account for vacancy, reduce your monthly rent by the expected vacancy rate. For example, if you expect 1 month vacant per year, use 11/12 of the monthly rent, or include the lost rent in the annual expenses figure.
Related calculators
- ROI— Return relative to investment cost.
- Mortgage— Long-term home loan amortization.
- Compound Interest— Growth of money with reinvested interest.
- Borrowing Power— Maximum loan you can afford.