Rental Yield Calculator (Gross & Net)

How it works

gross yield = annual rent ÷ purchase price · net yield = (annual rent − vacancy − management − maintenance − fixed costs − property tax) ÷ (price + purchase costs) · 1% rule: monthly rent ÷ price ≥ 1% · cash-on-cash = (NOI − mortgage payments) ÷ (deposit + purchase costs) · interest cover = annual rent ÷ annual interest

Yield expresses a property's rent as a return on the money tied up in it, and the gross figure — a year's rent over the price — is what listings quote because it flatters. The net figure subtracts the costs of owning and letting: weeks empty between tenants, agents' fees, repairs, insurance, service charges, property tax and licences, and it divides by the true all-in cost including transfer taxes and legal fees, so it is the number to compare against a savings rate, a bond or the mortgage you would use to buy. Enter the rent per week, month or year — UK and Australian lets are often quoted weekly. Turn on the mortgage option to see what leverage does: the payment (interest-only or repayment), the cash flow left after it, the cash-on-cash return on your deposit and costs, whether the rent passes lenders' interest-cover and debt-service tests, and whether the let is positively or negatively geared. A sensitivity table shows how the net yield moves if the price or rent is 5–10% different, and the rent-needed check tells you what rent (or price) would hit your target. Yields are structurally low where prices have run ahead of rents, which is why investors in expensive cities count on capital growth while those in cheaper regions buy for income.

Worked example

A $250,000 flat bought with $12,000 of costs and let at $1,500 a month has a gross yield of 7.2%. Allowing 4% vacancy ($720), 10% management ($1,728), $1,800 of maintenance and $1,200 of fixed costs leaves $12,552 of net operating income, a net yield of 4.79% on the $262,000 all-in cost. Monthly rent is 0.6% of the price, well short of the 1% rule; reaching a 5% net yield would need about $1,553 a month. With a 25% deposit and a $187,500 interest-only mortgage at 6% ($937.50 a month), the cash flow is $12,552 − $11,250 = $1,302 a year, a 1.75% cash-on-cash return on $74,500 — the 6% rate is above the 4.79% yield, so borrowing lowers the cash return.

Frequently asked questions