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%

    Ready to run the numbers?

    Open Rental Yield Calculator (Gross & Net)