Rental Yield Calculator (Gross & Net) Formula

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

Use the Rental Yield Calculator (Gross & Net)

Formulas Used

Gross Rental Yield

gross_rental_yield = gross_yield

Net Rental Yield

net_rental_yield = net_yield

Annual Gross Rent

annual_gross_rent = annual_rent

Annual Net Income

annual_net_income = net_income

Monthly Net Income

monthly_net = net_income / 12

Expense Ratio

expense_ratio = annual_rent > 0 ? ((annual_expenses + annual_vacancy_loss) / annual_rent) * 100 : 0

Variables

VariableDescriptionDefault
property_valueProperty Value / Purchase Price(USD)350000
monthly_rentMonthly Rental Income(USD)2400
annual_expensesAnnual Operating Expenses(USD)8500
annual_vacancy_lossAnnual Vacancy Loss(USD)1440
annual_rentDerived value= monthly_rent * 12calculated
effective_incomeDerived value= annual_rent - annual_vacancy_losscalculated
net_incomeDerived value= effective_income - annual_expensescalculated
gross_yieldDerived value= property_value > 0 ? (annual_rent / property_value) * 100 : 0calculated
net_yieldDerived value= property_value > 0 ? (net_income / property_value) * 100 : 0calculated

How It Works

Gross vs. Net Rental Yield

Rental yield measures the income return on a property investment, expressed as a percentage of the property value. There are two important variations.

Gross Rental Yield

Gross Yield = (Annual Rental Income / Property Value) x 100

This is the simplest measure, using total rent before any deductions. Useful for quick comparisons but overstates actual returns.

Net Rental Yield

Net Yield = (Annual Rent - Expenses - Vacancy) / Property Value x 100

This accounts for operating expenses and vacancy, giving a more realistic picture of investment performance.

Interpreting Yield

  • Gross yield of 6-8% is generally considered good for residential property
  • Net yield is typically 2-4% lower than gross yield
  • Compare net yield to alternative investments (bonds, stocks) for a fair comparison
  • Higher yield often means higher risk or lower appreciation potential

    • Worked Example

    A $350,000 property renting for $2,400/month with $8,500 in annual expenses and $1,440 in vacancy loss.

    property_value = 350000monthly_rent = 2400annual_expenses = 8500annual_vacancy_loss = 1440
    1. 01Annual gross rent: $2,400 x 12 = $28,800
    2. 02Effective income: $28,800 - $1,440 = $27,360
    3. 03Net income: $27,360 - $8,500 = $18,860
    4. 04Gross yield: $28,800 / $350,000 = 8.23%
    5. 05Net yield: $18,860 / $350,000 = 5.39%
    6. 06Expense ratio: ($8,500 + $1,440) / $28,800 = 34.5%

    Frequently Asked Questions

    What is a good net rental yield?

    A net yield of 4-6% is generally considered acceptable for residential investment property. In high-appreciation markets, yields may be lower (3-4%) because investors accept less current income in exchange for higher capital growth. In cash-flow markets, net yields of 6-8% are achievable.

    Why is there such a difference between gross and net yield?

    The gap reflects operating expenses, which typically consume 30-50% of gross rent. Major expense categories include property taxes, insurance, maintenance, management fees, and vacancy. Properties with lower expense ratios have a smaller gap between gross and net yield.

    Should I use yield or cap rate?

    Rental yield divides income by the purchase price (your cost), while cap rate divides NOI by the current market value. For acquisition analysis, yield based on your purchase price is more relevant. Cap rate is better for comparing properties at different price points in the same market.

    Ready to run the numbers?

    Open Rental Yield Calculator (Gross & Net)