Rental Yield Calculator
Rental yield is annual rent as a percentage of a property's price. The gross figure ignores every cost of ownership; the net figure subtracts them first. Only the net version is comparable between properties, and the difference between the two is substantial.
Gross and net yield
Net yield is the comparable one. Gross exists mainly in listings.
Net yield is (rent − costs) ÷ price. Costs commonly run a quarter to a third of the rent, which is why the gross figure and the net one are so far apart.
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How the number is built
Rental yield expresses the rent as a return on the purchase price. There are two versions and they are far apart.
Gross yield = annual rent ÷ price
Net yield = (annual rent − annual costs) ÷ price
Gross is the figure in listings and in most conversations. It requires no information about the property beyond the asking price and the rent, which is precisely why it is available and why it is not comparable between properties.
A worked example
Take the defaults: a 250,000 property, 21,600 of annual rent, 7,200 of annual costs.
Gross yield is 21,600 ÷ 250,000 = 8.64%.
Net yield is 14,400 ÷ 250,000 = 5.76%.
And the costs are 33.3% of the rent — a third of the income gone before the yield is calculated, which is an ordinary figure rather than a pessimistic one.
Read those two percentages together. The same property is either an 8.64% asset or a 5.76% one depending entirely on which convention is used, and only one of the two conventions is describing money you receive.
What goes in the costs line
Five items, and the last two are the ones left out. Management is around a tenth of rent if you use an agent. Insurance and property tax are billed and therefore hard to forget. Maintenance and vacancy are neither billed nor forgettable in reality — only in spreadsheets.
A vacancy allowance is a monthly number, not an event. A property empty one month in twelve has lost 8.3% of its rent, which on the default figures is 1,800 a year and a full percentage point of net yield.
Maintenance is the same shape. The roof has a replacement date; you simply do not know it yet.
Yield against the alternatives
A yield figure only means something next to what the same money does elsewhere, and property carries obligations the alternatives do not.
The default property nets 5.76%. That is the return for capital that cannot be sold quickly, requires management, carries repair risk, and is concentrated in a single asset at a single address.
Compare that against a broad index fund, where this site’s own arithmetic on fees applies: 5 basis points removes 1.5% of a thirty-year pot and 75 removes 20.2%. A tracker charging 20 basis points is taking a fraction of what a letting agent takes at a tenth of the rent.
None of which makes property the wrong choice. It makes the comparison the decision. Leverage is available on property and not on a fund, the income is contractual rather than variable, and some people would rather own a building than a spreadsheet entry. The point is that 5.76% has to be argued for against the alternatives, not just calculated.
Why a high yield is usually a warning
Yield is a fraction with price on the bottom. A large number can mean strong rent or a weak price, and across a market it usually means the second — properties are cheap relative to their rent for reasons, and the reasons show up later as vacancy, arrears and maintenance.
Which is the same warning this site gives about dividend yield, for the same arithmetic reason. A screen sorted by yield descending is, approximately, a screen sorted by problems.
The measure’s real job is comparison, not prediction. Two properties on the same net basis can be ranked. Neither figure says what either will be worth.
The original data
Of the 24,971 unique videos in research/search-study-corpus.jsonl, zero have an
instruction-shaped title about rental yield. Real estate appears in 171 titles at a median of 27,987
views, BRRRR in 5 instruction-shaped titles at 242,150, and cap rate in 1 at 133,224. The counts come
from site/rank_tools2.py.
Cap rate has exactly one instruction-shaped video in the corpus and it has 133,224 views. A single data point is an anecdote rather than an estimate — but it sits alongside 171 real-estate videos and zero on the yield measures underneath them, and the pattern is consistent enough across every subject on this site to be worth acting on.
The answer to the question on that chart is that a gross yield cannot be good or bad, because it is not a return. Take a third off for costs and 11% becomes about 7.3% — then ask why a property is priced to yield that much, because the market rarely offers a return that size without a reason attached.
When it fails
Yield describes an income stream and ignores the cost of getting into and out of it. On this site’s shared price series a round trip costs 2% of a median bar’s range and is treated as a significant drag; buying and selling a property costs several percent of the whole asset in fees, taxes and legal costs. A 5.76% net yield takes well over a year simply to recover the transaction, so this figure is only meaningful attached to a long hold.
The second failure is arrears rather than vacancy. A non-paying tenant who cannot quickly be removed produces zero rent and continuing costs, which is worse than an empty property.
A third is quoting gross. It is not a return and it is not comparable across properties with different cost structures.
A fourth is using the purchase price years later. Yield on the original price flatters a property whose value has risen; yield on current value is the honest comparison against selling.
A fifth is ignoring financing. This measure is unlevered, so it is not comparable to a cash-on-cash figure on a mortgaged deal.
And a sixth is treating it as total return. Appreciation and loan paydown are excluded, which understates a long hold as much as excluding costs overstates a short one.
Related
Rental property covers what ownership involves and where the costs come from. Real estate is the asset class and how it differs from securities. And dividend investing is where the same yield-is-a-fraction warning applies to a completely different asset.
Yield is a fraction and the price is on the bottom, which means the same warning applies here as with dividend stocks: a high number is usually news about the denominator. The highest-yielding properties I have looked at were high-yielding because nobody wanted to live there, and that shows up in the vacancy line rather than in the yield.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.