Rental Yield Calculator
Calculate the rental yield on a property to understand your return on investment. Compare different properties and investment opportunities easily.
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Enter property value and annual income to calculate rental yield.
Formula Explanation
Rental yield shows what percentage of the property value you earn back annually:
A rental yield of 5% means you earn 5% of the property value in rental income each year. Higher yields typically indicate better investments, but also may carry higher risk.
Gross Yield vs. Net Yield
This calculator shows gross rental yield — annual rent as a percentage of property value, before any expenses. It is a quick screening metric for comparing investment properties. Net rental yield subtracts operating expenses (property management fees, insurance, maintenance, vacancies, property taxes, and repairs) from annual income before dividing by property value. Net yield is typically 2–3 percentage points lower than gross yield and is the more meaningful profitability measure.
For a property worth $400,000 renting for $2,000/month: gross yield = ($24,000 ÷ $400,000) × 100 = 6%. If annual expenses are $8,000, net yield = ($16,000 ÷ $400,000) × 100 = 4%. Both figures matter — gross yield for quick comparisons, net yield for actual return assessment.
What Is a Good Rental Yield?
In the US, gross rental yields typically range from 4–8% depending on the market. High-cost coastal markets like San Francisco and Manhattan often produce yields of 2–4% — landlords are betting on appreciation rather than income. Lower-cost Midwest and Sun Belt markets often produce 6–10% gross yields where price-to-rent ratios are more favorable. A gross yield above 7% generally suggests strong cash-flow potential; below 4% means you are primarily relying on appreciation for your return. Always calculate net yield after expenses before committing to a purchase.
Frequently Asked Questions
How is rental yield different from cap rate?
Rental yield compares income to property value and is often calculated on gross income. Cap rate (capitalization rate) uses net operating income (income minus all operating expenses, before mortgage payments) divided by property value. Cap rate is the preferred metric among commercial real estate investors because it reflects actual operating performance independent of financing. For residential properties, rental yield is simpler to calculate and useful for quick comparisons; cap rate gives a more complete picture once you have expense data.
Should I use purchase price or current market value?
Use current market value to track your ongoing yield as the investment evolves. Use purchase price to evaluate whether the original investment was sound and to calculate your actual return on invested capital. Both are useful in different contexts. If you bought at $300,000 and the property is now worth $400,000, your yield on current value is lower (reflecting market appreciation), but your yield on cost is unchanged — which matters for evaluating your original decision. When screening new purchases, always use the asking price or estimated purchase price.
How do vacancy rates affect rental yield?
Vacancy is one of the biggest reducers of net yield. A property that sits vacant for one month per year loses 8.3% of its potential annual income. At a 6% gross yield, that single month of vacancy reduces effective income yield to about 5.5%. Most experienced investors budget 5–10% for vacancy and credit loss. In high-demand urban markets, vacancy may be 2–3%; in slower markets or with higher tenant turnover, it can reach 10–15%. Factor in your market's realistic vacancy rate when estimating net yield — do not assume the property will be 100% occupied every year.