What is the Rental Yield Calculator?
Rental yield expresses what a property earns as a percentage of what it cost. It exists so that properties of very different prices can be compared on the same basis, and so that a rent figure can be judged against what the same capital might do elsewhere.
The distinction that matters is between gross and net. Gross yield is rent divided by price and is the number quoted in listings. Net yield subtracts the costs of actually owning the thing, and is usually a good deal lower.
What each input means
- Property price
- What the property cost, or would cost. For a fair comparison include the purchase costs, since they were capital you committed.
- Monthly rent
- The rent actually collected when tenanted, not the asking figure.
- Annual costs
- Property tax, maintenance, repairs, insurance, management or letting fees, and society charges.
- Vacant weeks per year
- Weeks the property earns nothing between tenants. Two to four weeks is a common working assumption; zero is optimistic.
How this calculation works
Gross yield is annual rent divided by the price, times a hundred. Net yield takes annual rent, removes the rent lost to vacant weeks, subtracts the running costs, and divides what remains by the price.
The gap between the two is the point of the exercise. Costs and vacancy routinely take a third or more off the gross figure, which is why a property advertised on gross yield can look competitive with investments it does not actually match.
Neither figure includes capital growth or the effect of a mortgage. Yield measures the income the asset produces against its price, and deliberately says nothing about what the property might later sell for.
Formula: Net yield = (annual rent - vacancy - costs) / price x 100
Getting the most out of the result
- Compare net yield against what the same capital would earn elsewhere, after tax and effort. Property demands both in a way a deposit does not.
- Include purchase costs in the price. They were capital you spent, and excluding them flatters the yield.
- Budget for maintenance as an annual average, not as whatever happened to be spent last year. Roofs and boilers arrive on their own schedule.
- A high yield often signals higher risk, weaker demand or worse capital growth prospects. It is information, not simply an opportunity.
- If the property is mortgaged, the yield on your own invested capital differs from the yield on the price. Borrowing amplifies both the return and the loss.
Common mistakes to avoid
The most common error is quoting gross yield and treating it as income, when costs and vacancy typically remove a substantial share of it. Assuming full occupancy every year is the second, and it is optimistic in almost any market. Leaving purchase costs out of the price is the third, since it understates the capital actually committed and overstates the return on it. And judging a property on yield alone ignores that total return combines income and capital growth, which frequently move in opposite directions across different locations.
Frequently asked questions
What is the difference between gross and net rental yield?
Gross yield is annual rent divided by the property price. Net yield subtracts running costs and rent lost to vacancy before dividing. Gross is the figure in listings; net is closer to what the property actually pays you.
What is a good rental yield?
It depends entirely on the market, the property type and what else your capital could do. The more useful comparison is against alternative uses of the same money, adjusted for the work and the risk, rather than against a general benchmark.
Should I include the purchase costs in the price?
Yes, if you want an honest figure. Registration, stamp duty, legal and brokerage costs were capital you committed to acquire the income, so excluding them makes the yield look better than the investment was.
How much should I assume for vacancy?
Two to four weeks a year is a common working assumption, though it varies widely with location and property type. Assuming zero is the single most optimistic thing you can do to a yield calculation.
Does yield account for capital growth?
No, deliberately. Yield measures income against price. Total return combines that with any change in the property’s value, and the two often trade off — high-yield areas frequently show weaker growth and vice versa.
How does a mortgage change the yield?
It separates the yield on the property from the return on your own capital. Because you have committed less cash, the return on that cash is amplified in both directions, and the interest cost has to come out of the rent before anything reaches you.
Is rental income taxed?
Rental income is generally taxable and the treatment of costs, interest and depreciation varies by jurisdiction and changes over time. This calculator works before tax, so check the current rules that apply to you rather than assuming a figure.