Rental Yield Calculator
Last Updated:
Calculate gross and net rental yield. Enter property price, monthly rent, and annual expenses for a complete picture.
Net Rental Yield
0%
📐 Formula
Gross Yield = (Annual Rent ÷ Property Price) × 100. Net Yield = ((Annual Rent − Expenses) ÷ Property Price) × 100
How to Use the Rental Yield Calculator
Enter the property value
Input the current market value or recent purchase price. For a prospective purchase, use the asking price. Yield is directly tied to what you pay — overpaying compresses yield regardless of rental income.
Enter monthly rental income
Input the current or projected monthly rent. For an occupied property, use the lease rate. For a vacant property, research comparable rentals in the immediate area.
Enter annual expenses
Include all costs that reduce net yield: property tax, landlord insurance, maintenance budget (typically 1% of property value annually), property management fees (8–12% of rent if managed), and vacancy allowance (5–8% of annual rent).
Compare gross vs net yield
Gross yield ignores expenses and overstates returns. Net yield is the accurate measure of investment performance. A property with 7% gross yield and high expenses may have a net yield below 4%.
Gross vs Net Rental Yield: Why the Difference Matters
Gross rental yield divides annual rent by property value. A $450,000 property renting for $2,000/month earns $24,000 annually: $24,000 ÷ $450,000 = 5.3% gross yield. This is the headline number often quoted in property listings and media. It is useful for quick comparisons across markets but meaningless as a true return measure because it ignores all costs of ownership.
Net rental yield subtracts all annual operating expenses before dividing by property value. On the same property: $24,000 rent − $5,400 property tax − $1,200 insurance − $4,500 maintenance (1%) − $2,400 management (10%) − $1,200 vacancy (5%) = $9,300 net income. Net yield: $9,300 ÷ $450,000 = 2.1%. The spread between gross and net yield in this example is 3.2 percentage points — common for higher-cost urban markets where property taxes and management costs are elevated.
What Is a Good Rental Yield?
Benchmarks vary significantly by market, property type, and investment strategy. For residential property in US markets: a gross yield of 6–8% is generally considered healthy in secondary and tertiary cities; 4–6% is typical for major metropolitan areas (New York, Los Angeles, San Francisco) where appreciation expectations compensate for lower income yields. Net yields below 2–3% in high-cost markets mean the property barely covers ownership costs — the investment thesis depends almost entirely on capital appreciation. For investors seeking income rather than appreciation, a minimum net yield of 4–5% is a common threshold. The rule of thumb: if the net yield is below the 10-year Treasury rate, the risk-adjusted case for property over bonds is difficult to justify on income alone.
Looking to invest in property in South Africa? Rental yields in SA markets — particularly Cape Town's Atlantic Seaboard, Johannesburg's Sandton, and the KwaZulu-Natal coast — operate within a different cost structure than US benchmarks. Municipal rates, levies, and property management fees in SA can significantly compress net yield. SA Property Tools has dedicated South African rental yield and investment calculators that account for SA-specific holding costs, transfer duty, and bond financing.
Yield vs Cap Rate: Understanding the Difference
Rental yield and cap rate are closely related but not identical. Rental yield calculates return relative to the total property value (including land). Cap rate uses Net Operating Income (NOI) — which excludes mortgage costs but includes all operating expenses — divided by property value. For residential properties, the two figures are often similar. The primary distinction: cap rate is the standard metric in commercial real estate and among institutional investors; rental yield is more common in residential investment contexts. Use cap rate when comparing commercial properties; use net rental yield for residential portfolio analysis.
How to Calculate Rental Yield by Hand: Worked Example
Take a rental property purchased for $300,000, renting for $1,900/month, with $4,200/year in operating expenses (insurance, maintenance, management fees, vacancy allowance).
Gross rental yield = annual rent ÷ purchase price = ($1,900 × 12) ÷ $300,000 = $22,800 ÷ $300,000 = 7.60%.
Net rental yield = (annual rent − expenses) ÷ purchase price = ($22,800 − $4,200) ÷ $300,000 = $18,600 ÷ $300,000 = 6.20%.
The 1.4-percentage-point gap between gross and net represents real, recurring costs that the headline "7.6% yield" advertised in a listing conveniently omits. Comparing two properties on gross yield alone can be misleading if one carries a much higher HOA fee, insurance premium, or management cost than the other.
Why does net yield usually matter more for investment decisions?
Net yield reflects what the property actually keeps after the recurring costs of ownership — closer to what cap rate measures (the two are related but not identical: net yield uses purchase price as the denominator, while cap rate calculations sometimes use current market value). For financed purchases, net yield still excludes mortgage payments, isolating the property's own performance from the specific financing terms of any individual buyer.
What Counts as a Good Rental Yield, and How Does It Compare to Cap Rate?
What yield range is typically considered strong?
In many markets, a gross yield above 7% or a net yield above 5% is considered solid for a buy-and-hold rental, though the "good" threshold shifts with local financing costs and appreciation expectations. High-appreciation coastal markets often show yields well under 5% because buyers accept lower current income for expected future gains; slower-growth or higher-risk markets often show yields of 8–10%+ to compensate.
How is yield different from cap rate in practice?
The formulas are structurally similar (both measure income against price), but cap rate more commonly uses NOI — a fuller expense accounting that may include a formal vacancy allowance and structural reserve — while "rental yield" is more often used loosely, sometimes on a gross basis, in casual listings and international property marketing. When comparing a domestic cap rate figure to an international "yield" figure, confirm both are calculated net of the same expense categories before treating them as directly comparable.
Does yield account for appreciation or only current income?
Yield, whether gross or net, measures only the income the property generates today — it says nothing about expected future appreciation. A property with a modest 4% net yield in a fast-appreciating area can still outperform an 8%-yield property in a stagnant one once total return (income plus appreciation) is compared, which is why yield should be paired with a market's appreciation outlook, not used as the sole decision metric.
Frequently Asked Questions
Sources & Methodology
Calculations are based on the most current publicly available data from authoritative government and industry sources: