Rental yield is the simplest first filter: What percentage of the property’s value does it collect in gross rent each year, before any expenses?
How it works
Rental yield divides annual rental income by the property’s value. A $400,000 property that rents for $36,000 a year has an 9% gross yield.
Gross yield is not profit
A 9% gross yield sounds attractive until you subtract property tax ($4,000), insurance ($1,200), maintenance ($3,600), and vacancy ($3,600). What looked like $36,000 is now $23,600 in actual operating income before your mortgage payment. That’s why gross yield is a rough screening tool, not a profit number.
What this does not include
Gross yield is purely about revenue, not the costs of running the property. It ignores taxes, insurance, maintenance, turnover costs, and vacancy. Use it to compare the revenue-generation potential of different properties, then subtract expenses to find the actual return.
How to use this calculator
- Enter the annual rental income you expect to collect.
- Enter the property’s current or purchase value.
- The result is gross rental yield as a percentage—useful for comparing potential across markets or properties.
Frequently asked questions
What’s a good rental yield?
In lower-cost markets, 7–10% gross yield is typical. In expensive urban areas, 3–5% is common because prices are high and rents do not keep pace. The comparison that matters is the yield in your market versus alternatives: if yields are dropping market-wide, prices are rising and appreciation may compensate.
Should I use market-rate rent or actual rent?
Use what you actually collect or conservatively expect. A vacant unit generates zero yield. If your area has 8% vacancy, reduce your expected rent by 8%.
How is this different from cap rate?
Cap rate subtracts operating expenses to show net income as a percentage of value. Gross yield ignores expenses entirely. Both are useful: gross yield for a quick comparison, cap rate for a deeper look at actual profit.
