Net Rental Yield Calculator Formula

Understand the math behind the net rental yield calculator. Each variable explained with a worked example.

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Formulas Used

Net Rental Yield

net_yield = (net_income / purchase_price) * 100

Net Annual Income

net_annual_income = net_income

Effective Gross Income

effective_income = effective_annual

Variables

VariableDescriptionDefault
purchase_pricePurchase Price(USD)275000
monthly_rentMonthly Rent(USD)2200
vacancy_rateVacancy Rate(%)5
annual_expensesAnnual Operating Expenses(USD)5500
gross_annualDerived value= monthly_rent * 12calculated
effective_annualDerived value= gross_annual * (1 - vacancy_rate / 100)calculated
net_incomeDerived value= effective_annual - annual_expensescalculated

How It Works

Net Rental Yield

Net rental yield provides a realistic return picture by deducting vacancy losses and operating expenses from gross rent.

Formula

Net Yield = (Effective Rent - Expenses) / Purchase Price x 100

Where Effective Rent = Gross Rent x (1 - Vacancy Rate)

This Accounts For

  • Vacancy and collection losses
  • Property taxes, insurance, repairs
  • Property management fees
  • Maintenance and reserves

    • Worked Example

    A $275,000 property rents for $2,200/month with 5% vacancy and $5,500 annual expenses.

    purchase_price = 275000monthly_rent = 2200vacancy_rate = 5annual_expenses = 5500
    1. 01Gross annual rent: $2,200 x 12 = $26,400
    2. 02Effective rent after vacancy: $26,400 x 0.95 = $25,080
    3. 03Net income: $25,080 - $5,500 = $19,580
    4. 04Net yield: $19,580 / $275,000 x 100 = 7.12%

    Ready to run the numbers?

    Open Net Rental Yield Calculator