Rental Yield Calculator

Rental yield is a key metric for evaluating the return on a rental property investment. It expresses annual rental income as a percentage of the property's value, allowing investors to compare properties across different price ranges and locations. A higher yield generally means better income relative to the investment, though yield alone does not capture the full investment picture.

There are two main types of rental yield: gross yield (total rent ÷ property value × 100) and net yield (rent minus all expenses ÷ property value × 100). Net yield gives a more realistic picture of actual returns after accounting for the real costs of ownership.

Gross rental yield is the simpler calculation. If a property costs $300,000 and generates $18,000 per year in rent ($1,500/month), the gross yield is 6%. It is useful for quick comparisons but ignores all ownership costs.

Net rental yield subtracts all operating expenses from rental income before dividing by property value. Expenses typically include:

• Property management fees (8–12% of rent)
• Property taxes (0.5–2.5% of value annually)
• Insurance (0.3–0.5% of value annually)
• Maintenance and repairs (1–2% of value annually)
• Vacancy allowance (5–10% of annual rent)

If operating expenses reduce income from $18,000 to $12,000, the net yield on a $300,000 property is 4%. The difference between gross and net yield is often 2–3 percentage points.

A "good" rental yield depends heavily on location, property type, and your investment goals. General benchmarks:

• Below 4% gross: Common in high-demand urban markets. Lower yield but potentially higher appreciation.
• 4–6% gross: Moderate yield typical of stable residential markets.
• 6–8% gross: Strong yield common in secondary cities and emerging markets.
• Above 8% gross: High yield that may indicate higher risk or management-intensive properties.

Net yields of 4–6% after expenses are generally considered solid for long-term residential investment.

These three metrics serve different purposes in real estate analysis:

• Rental yield measures income relative to property value. Best for comparing properties regardless of financing.
• Cap rate is similar to net yield but uses Net Operating Income (NOI) and is typically used for commercial property analysis.
• Cash-on-cash return measures annual cash flow relative to actual cash invested (down payment + closing costs), accounting for leverage.

Savvy investors use all three metrics together to get a complete picture of a property's potential.