Real Estate Rental Yield Calculator
Calculate gross and net rental yield for your property investment
What is Rental Yield?
Rental yield is the percentage of return you get on your property investment from rental income. It is the most critical metric for real estate investors to determine if a property is a good investment.
Gross Yield vs. Net Yield
- Gross Rental Yield: (Annual Rent / Property Price) × 100. This is a quick estimate but ignores all expenses.
- Net Rental Yield: ((Annual Rent - Annual Expenses) / Property Price) × 100. This is the true return on investment, factoring in taxes, maintenance, and insurance.
What is a Good Rental Yield?
Generally, a gross rental yield between 5% and 8% is considered good. However, this varies heavily by location. High-appreciation areas (like major city centers) often have lower yields (3-4%), while secondary markets may offer higher yields (7-10%) to compensate for lower property value growth.
Example Calculation
If you buy a property for $300,000, rent it for $2,000/month ($24,000/year), with $5,000 in annual expenses and $12,000 in mortgage payments:
- Gross Yield = ($24,000 / $300,000) × 100 = 8.0%
- Net Operating Income = $24,000 - $5,000 = $19,000
- Net Yield = ($19,000 / $300,000) × 100 = 6.33%
- Annual Cash Flow = $19,000 - $12,000 = $7,000
Should I include mortgage payments in net yield?
Strictly speaking, "Net Operating Income (NOI)" excludes mortgage payments to evaluate the property itself. However, "Cash-on-Cash Return" or true cash flow calculations do include mortgage payments to show what actually lands in your bank account. This calculator shows both.
What expenses should I include in annual operating expenses?
Include property taxes, landlord insurance, routine maintenance, property management fees, HOA fees, and vacancy allowances (typically 5-8% of rent). Do not include mortgage principal/interest here.
Does this calculator account for property appreciation?
No, rental yield only measures income return. Property appreciation (the increase in the home's value over time) is a separate component of your total return on investment (ROI).