Rental yield shows annual rental income as a percentage of a property’s value. Gross yield uses rent before property expenses, while net yield deducts selected operating costs.
To calculate gross rental yield, divide annual rent by the property’s purchase price or current value, then multiply by 100. To calculate net yield, subtract the chosen annual property costs from rent before dividing by the property value.
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Gross Rental Yield
If weekly rent is $600, annual rent is $31,200. On a $650,000 purchase price, gross yield is $31,200 divided by $650,000, multiplied by 100. That produces about 4.8% before costs.
Net Rental Yield
Net yield gives a narrower view of operating return. Deduct the expenses included in the analysis, such as management fees, rates, insurance, maintenance and body corporate charges. State which costs were included so two properties can be compared on the same basis.
What Yield Does Not Show
- Vacancy or an unexpected repair can reduce actual income.
- Capital growth is separate from rental return.
- Loan repayments and tax treatment depend on the owner.
- A high yield can reflect higher property or location risk.
Financing costs change when interest rates or the loan balance changes. Keep rental yield separate from cash flow, then model both before the client commits to a purchase.
Broker Check
Use a realistic rent estimate and allow for vacancy. Confirm the property value used in the calculation, list the costs included in net yield and refer tax treatment to a qualified tax adviser.
