Rental Yield Calculator: Gross and Net Yield
Rental yield tells you how hard a property's price works as rent. Enter the price, rent, vacancy and yearly costs to get the gross yield and the net yield after running costs.
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Formula
Gross yield = (monthly rent × 12) ÷ price × 100Rent collected = monthly rent × 12 × (1 − vacancy ÷ 100)Net income = rent collected − yearly running costsNet yield = net income ÷ price × 100
Worked example
A property costs 250,000 and rents for 1,500 a month, with 5% vacancy and 3,000 of yearly costs.
- Yearly rent: 1,500 × 12 = 18,000, so gross yield = 18,000 ÷ 250,000 = 7.2%.
- Rent collected: 18,000 × 0.95 = 17,100.
- Net income: 17,100 − 3,000 = 14,100, so net yield = 14,100 ÷ 250,000 = 5.64%.
Mortgage payments and income tax are not included.
When to use it
Use rental yield to compare properties or cities by how much rent each unit of price buys. Use the gross rent multiplier calculator for a one-number screen, the cap rate calculator when you want to value a building from its income, and the rental property cash flow calculator when the mortgage is part of the question.
Second example
A flat costs 400,000 and rents for 2,000 a month with 5% vacancy and 4,800 of yearly costs.
- Gross yield: 24,000 ÷ 400,000 = 6%.
- Rent collected: 24,000 × 0.95 = 22,800; net income 18,000.
- Net yield: 18,000 ÷ 400,000 = 4.5%.
Common mistakes
- Including mortgage interest in costs. Yield measures the property, not the loan.
- Forgetting vacancy, letting fees, repairs and service charges.
- Comparing a gross yield from one advert with a net yield from another.
- Using the advertised rent instead of what tenants pay.
Frequently asked questions
What is rental yield?
Rental yield is the yearly rent as a percentage of the property price. A 250,000 property that rents for 1,500 a month brings in 18,000 a year, so the gross yield is 18,000 ÷ 250,000 = 7.2%.
What is the difference between gross and net yield?
Gross yield uses the full rent and ignores costs. Net yield subtracts vacancy and running costs first. With 5% vacancy and 3,000 of costs, the same property keeps 14,100 a year, a net yield of 5.64%.
Which costs should I include in running costs?
Include costs you pay each year to own and let the property: insurance, property taxes, maintenance, management fees and service charges. Do not include mortgage payments, because yield measures the property, not how it is financed.
What is a good rental yield?
It depends on the market, and yields differ widely between cities and property types. Compare the net yield with other properties you could buy and with the cost of borrowing, and treat it as one measure among several.
What is the rental yield formula in Excel?
Gross yield is =monthly rent*12/price, formatted as a percentage. For net yield use =(rent*12*(1-vacancy)-costs)/price. With 2,000 rent, 5% vacancy, 4,800 of costs and a 400,000 price, gross yield is 6% and net yield is (22,800 - 4,800) ÷ 400,000 = 4.5%.
How is rental yield different from cap rate?
They are nearly the same idea. Net yield here applies a vacancy rate to rent and subtracts the running costs you enter, which is the net operating income, so it equals the cap rate if you include every operating cost. Use the cap rate page when you want to solve for value or income.
Is rental yield the same as return on investment?
No. Yield ignores the loan, price growth and the cash you actually put in. A 4.5% net yield on a 400,000 property paid for with a loan can produce a very different return on your own cash, which the cash on cash return calculator measures.