What rental yield means
Rental yield tells you how hard a property works as an investment. It is the annual rent it produces measured against what the property is worth, written as a percentage. That single number lets you line up a small flat against a large house and see which one actually pays you back more per dollar tied up, rather than being fooled by the bigger price tag or the nicer kitchen.
There are two flavours and you want both. Gross yield just divides the yearly rent by the price, which is fine as a first-glance filter. Net yield subtracts the real cost of owning the place first — upkeep, taxes, insurance, empty months — and it is the one that reflects what genuinely lands in your account. Gross yield flatters; net yield tells the truth.
The whole calculation runs in your browser. Nothing you type is uploaded anywhere. Enter the price, the monthly rent and your running costs, and you get the gross yield, the net yield and the annual net income straight away. Pick whichever currency you work in.
How to use the calculator
- Property price or value: what you paid, or what it is worth today. To be strict, fold in buying costs such as transfer tax and legal fees.
- Monthly rent: the rent you collect each month. The tool multiplies it by 12 to get the annual rent.
- Annual costs: split your spending into maintenance, property taxes, insurance and vacancy (the months the place sits empty, plus odd surprises). They are all added together.
The formula
Two chained formulas do the work:
Gross yield (%) = (annual rent ÷ price) × 100
Net yield (%) = ((annual rent − annual costs) ÷ price) × 100
where the annual net income = annual rent − annual costs. If costs outrun the rent, both the net income and the net yield turn negative — the property is draining money every year.
Worked example
You buy a flat for 250,000 and let it at 1,500 a month. Your yearly costs add up to 3,000 (maintenance 1,200, taxes 1,000, insurance 500 and vacancy 300).
- Annual rent: 1,500 × 12 = 18,000
- Gross yield: (18,000 ÷ 250,000) × 100 = 7.2%
- Annual net income: 18,000 − 3,000 = 15,000
- Net yield: (15,000 ÷ 250,000) × 100 = 6.0%
The gap between 7.2% and 6.0% is 1.2 points swallowed whole by running costs. Overlooking that gap is the classic mistake of a first-time buy-to-let investor.
Gross versus net
| Aspect | Gross yield | Net yield |
|---|---|---|
| What it deducts | Nothing | All annual costs |
| Best used for | Quick first screen | The real decision |
| Example (price 250,000) | 7.2% | 6.0% |
| Tends to | Overstate returns | Match your pocket |
What yield to aim for
There is no magic number, but there are anchors. A net yield below 3-4% often lands near what a savings certificate pays without the hassle or risk of a tenant. A net yield of roughly 5% to 8% is considered solid in most markets. Anything above 10% deserves suspicion: it usually hides weak demand, a property that needs heavy work, or a sum that quietly forgot some costs. High yield with low risk simply does not exist.
Frequently asked questions
Should I use the purchase price or today’s value?
It depends on the question. To judge whether the purchase was smart, use the price you paid. To decide whether to keep the property or sell and put the money elsewhere, use the current market value — that is the capital actually locked up right now.
Why is my net yield so much lower than the gross?
Because recurring costs weigh more than people expect. Annual taxes, insurance, service charges, repairs and, above all, empty months chip away at the rent. A net yield one or two points under the gross is normal; if the gap is wider, hunt down which cost is eating the return.
Does this include the mortgage?
No. It measures yield on the full property value, without financing. If you bought with a mortgage, your return on the cash you actually put down can be much higher thanks to leverage, but you also take on the risk of the debt. That deserves a separate cash-flow analysis.
How do I estimate vacancy?
A prudent rule is to assume the place stays empty about one month a year, roughly 8% of the annual rent. In high-demand areas you can trim that; in seasonal spots or with tenants who turn over often, raise it.