Last Updated: 20th April, 2023

What Is Rental Yield?

Rental yield is a measure of the return on your investment property from rental income. It is the total annual rental income you receive, expressed as a percentage of the property’s value. Understanding how property yield works can help you make informed decisions to ensure a good return on your investment. By knowing how to calculate rental yield, you can:
  • Assess a property’s potential value as an income-earning asset, compared with others in your area
  • Figure out if you’re earning a high enough rental yield or if you should reconsider your investment strategy for a particular property

How To Calculate Rental Yield On A Property

Understanding how to calculate rental yield can help shape your investment goals. You can measure gross rental yield or net rental yield.

How do I Calculate Gross Rental Yield?

Most people measure their returns using gross rental yield, which is the total annual rental income received from a property, expressed as a percentage of its purchase cost. Your property’s gross rental yield is calculated this way:
  • Your total annual rent from the property
  • Divided by what you paid for the property
  • Multiplied by 100
Gross rental yield = (Total annual rent ÷ Total Property Purchase Price) x 100 For example, suppose you bought a property for $650,000, which earns a rent of $590 a week ($30,680 a year). Using the above formula, the calculation would look like this: ($30,680 ÷ $650,000) x 100 = 4.72%, which is the gross yield of the property.

How Do I Calculate Net Rental Yield?

Net rental yield is the total annual rental income received, minus any property expenses, expressed as a percentage of the property’s purchase price including initial costs. It provides a more accurate picture of return on a property investment, as it takes expenses into account. Calculate your property’s net rental yield this way: