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Rental Yield Calculator

Calculate gross and net rental yield, maximum purchase price, or minimum rent for your investment property. With detailed cost breakdown and cashflow projection.

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Gross Yield

4.32%

Gross Yield

4.32%

Net Yield

3.19%

Maintenance
$840.00
Management
$360.00
Vacancy Allowance
$216.00
Non-Recoverable Costs
$600.00
Total Costs
$2,016.00

Net Rental Income/Year

$8,784.00

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What Is Rental Yield?

Rental yield is the most important metric for property investors. It measures what percentage of your invested capital is returned annually through rental income. There are two key variants: gross rental yield, which simply divides annual rent by the purchase price, and net rental yield, which also factors in operating costs and closing costs. Only the net yield provides a realistic assessment of whether an investment property is truly profitable.

Gross Yield vs. Net Yield

Gross yield is often quoted in property listings because it is easy to calculate: annual rent divided by purchase price, multiplied by 100. It is useful for quickly comparing different properties but tells you little about actual profitability because it ignores maintenance, vacancy, and management costs. Net yield accounts for the total investment including closing costs and subtracts all non-recoverable expenses from income. This gives you a much more accurate picture of your real return on investment.

What Costs Should You Factor In?

Beyond the purchase price, significant closing costs apply: transfer taxes, legal fees, title insurance, and potentially agent commissions. These typically add 2% to 5% of the purchase price in the US. On an ongoing basis, you need to budget for maintenance reserves, which can range from $8 to $20 per square foot per year depending on the age and condition of the property. Add property management fees, a vacancy allowance, and non-recoverable expenses such as common area repairs. All of these line items significantly reduce the net yield compared to the gross yield.

Location and Yield

The property location has a major impact on rental yield. In gateway cities like New York, San Francisco, or London, purchase prices are high while rents do not increase proportionally, resulting in lower gross yields of often just 2% to 3%. In secondary and tertiary markets, higher yields of 5% to 8% are achievable, though typically with higher vacancy risk and less capital appreciation potential. A thorough location analysis is essential before making any investment decision, balancing yield expectations against long-term value growth and tenant demand.

Frequently Asked Questions

Gross rental yield is the annual rental income expressed as a percentage of the property purchase price. It is calculated by dividing the annual rent by the purchase price and multiplying by 100. While useful for quick comparisons between properties, it does not account for operating costs, vacancy risk, or purchase expenses.
Gross yield only considers rental income relative to the purchase price. Net yield deducts all non-recoverable operating costs such as maintenance, management fees, vacancy allowance, and non-recoverable expenses from the income, and includes the total investment cost (purchase price plus closing costs) in the denominator. Net yield gives a more realistic picture of actual returns.
A gross rental yield above 5% is generally considered attractive, while 4% is solid. Net yields above 3% are typically desirable. In major cities with high property prices, yields tend to be lower but may be offset by stronger capital appreciation. In secondary markets, higher yields are possible but often come with increased vacancy risk.
Closing costs include transfer taxes, legal and notary fees, title insurance, and potentially real estate agent commissions. In the US, buyers typically pay 2% to 5% of the purchase price in closing costs. In other markets, these costs can be higher. Always factor them into your total investment to calculate an accurate net yield.
Vacancy risk represents the probability that a property will be unoccupied or that tenants will fail to pay rent. A common rule of thumb is to set aside 2% to 5% of annual gross rent as a vacancy allowance. In high-demand areas with low vacancy rates, this figure can be lower. In areas with weaker demand, it should be higher to provide an adequate safety margin.

All calculations are for general informational purposes only. Not financial, tax, or legal advice. No guarantee of accuracy. Use at your own risk. Full disclaimer