Bhuvan PoudelHow rental yield is calculated
Gross yield = annual rent ÷ property price × 100. Net yield = (rent collected − management fee − other annual costs) ÷ (property price + purchase costs) × 100.
- Annualise rent: weekly × 52, fortnightly × 26, monthly × 12 or yearly × 1.
- Calculate gross yield using annual scheduled rent and property price.
- Deduct vacancy, then management fees and other annual costs from collected rent.
- Divide net annual income by price plus purchase costs to find net yield.
Worked example: A property priced at 500,000 with rent of 500 per week has annual rent of 26,000 and gross yield of 5.2%. With no vacancy or management fee, 6,000 annual costs leave 20,000 net income. Adding 25,000 purchase costs gives a cost base of 525,000 and net yield of 3.81%.
Rental yield examples
| Property price | Rent | Period | Annual costs | Gross rental yield | Net rental yield | Annual rent before vacancy | Net annual income |
|---|---|---|---|---|---|---|---|
| 500,000 | 500 | Per week | 0 | 5.2% | 5.2% | 26,000 | 26,000 |
| 400,000 | 2,000 | Per month | 0 | 6% | 6% | 24,000 | 24,000 |
| 750,000 | 650 | Per week | 6,000 | 4.51% | 3.71% | 33,800 | 27,800 |
| 300,000 | 1,500 | Per month | 0 | 6% | 6% | 18,000 | 18,000 |
Swipe the table sideways to see the rest.
No vacancy, management fee or purchase costs in these examples. All amounts use the same currency.
Things to consider
- Use realistic vacancy rather than assuming the property is always occupied.
- Include rates, insurance, maintenance and strata or HOA fees in other annual costs.
- Purchase costs are one-off amounts, not annual operating expenses.
- Weekly collected rent is an annual average after vacancy, not the rent charged during an occupied week.
- Net yield may be negative when costs exceed rent. Borrowing costs and capital growth are not included.
Frequently asked questions
What is the difference between gross and net rental yield?
Gross yield compares scheduled annual rent with property price before expenses. Net yield deducts vacancy, management fees and other annual costs, then compares net income with price plus purchase costs.
How do I calculate rental yield?
Annualise rent, divide by property price and multiply by 100 for gross yield. For net yield, subtract vacancy and annual operating costs, then divide by the total cost base and multiply by 100.
What is a good rental yield?
It varies by location, property type, condition and risk. Lower yields can come with more capital growth, but growth is not guaranteed. Compare realistic costs and similar properties rather than relying on one target percentage.
How does yield differ from ROI and cash flow?
Yield measures annual rental income relative to property cost. ROI can also include capital gains and sale costs. Cash flow accounts for money paid and received, including loan payments. This tool excludes borrowing, income tax and capital growth.
Which costs should I include?
Include recurring rates, insurance, maintenance, strata or HOA charges and other operating expenses as one annual total. Enter management fees separately as a percentage of collected rent. Add one-off purchase taxes and legal fees to purchase costs without assuming any local tax rules. Do not count a cost twice.