Rental Yield Calculator
Calculate the rental yield on your investment property. Compare gross yield vs net yield, analyze operating expenses, and compare multiple properties to find the best investment opportunity.
Property Details
Enter basic property and rent information
Gross Rental Yield
Annual rent as a percentage of property value
Rental Yield Benchmarks
Below average, hard to cash flow
Typical for appreciation markets
Strong cash flow potential
High cash flow, verify the numbers
What is Rental Yield?
Rental yield is a metric that measures the income-generating potential of a rental property as a percentage of its value. It is one of the most important metrics for real estate investors because it quickly shows how much income a property produces relative to its price.
There are two main types of rental yield: gross yield and net yield. Understanding the difference between them is crucial for making informed investment decisions.
Gross Yield vs Net Yield
Gross Rental Yield
- What it measures: Total rental income vs property price
- Excludes: All operating expenses
- Best for: Quick property comparisons
- Limitation: Overstates actual returns
Net Rental Yield
- What it measures: Actual income after expenses
- Includes: All operating costs
- Best for: Accurate profitability analysis
- Advantage: Shows true return potential
Example: A $300,000 property renting for $2,500/month has a gross yield of 10%. But after $10,000 in annual expenses, the net yield drops to 6.7%. The 3.3% difference represents the expense drag on your returns.
What is a Good Rental Yield?
Gross Yield Benchmarks
Net Yield Benchmarks
Common Operating Expenses
When calculating net yield, include these typical operating expenses:
Fixed Costs
- Property taxes (1-2% of value/year)
- Insurance ($1,000-$2,500/year)
- HOA fees (if applicable)
Variable Costs
- Maintenance (5-10% of rent)
- Repairs and replacements
- Utilities (if owner-paid)
Management Costs
- Property management (8-12% of rent)
- Vacancy allowance (5-10%)
- Advertising and leasing
Price-to-Rent Ratio
The price-to-rent ratio is the inverse of gross yield - it shows how many years of rent it would take to equal the property price. Lower ratios indicate better investment potential.
| Price-to-Rent Ratio | Gross Yield Equivalent | Interpretation |
|---|---|---|
| 1-10 | > 10% | Excellent for renting (investing) |
| 10-15 | 6.7-10% | Good rental yield |
| 15-20 | 5-6.7% | Neutral market |
| > 20 | < 5% | Better to rent than buy for investing |
Frequently Asked Questions
Should I use gross or net yield to compare properties?
Use gross yield for quick initial comparisons, but always calculate net yield before making a final decision. Two properties with the same gross yield can have very different net yields due to varying expense ratios.
Why is my net yield so much lower than gross yield?
A large gap between gross and net yield (often 3-5%) is normal. It represents all operating expenses. If the gap is larger than 5%, review your expenses - you may have high property taxes, significant HOA fees, or management costs.
Does rental yield include mortgage payments?
No, rental yield calculations do not include mortgage payments. This is intentional - it allows you to compare properties regardless of how they are financed. Use cash on cash return to factor in your specific financing.
How do I improve the rental yield on my property?
You can improve yield by: increasing rent (renovations, better marketing), reducing expenses (shop for insurance, appeal property taxes), adding income streams (parking, storage), or buying properties below market value.
Is a high rental yield always better?
Not necessarily. Very high yields (10%+) often come with higher risk: challenging locations, older properties needing repairs, or difficulty finding quality tenants. Balance yield with appreciation potential, location quality, and your investment goals.