Rental yield calculator
Gross rental yield is yearly rent divided by the purchase price. Net rental yield subtracts yearly operating expenses from rent and divides by the price plus purchase costs. Gross yield is a quick screen; net yield is closer to what the property actually earns.
Results
How do you calculate gross rental yield?
Gross yield = (monthly rent x 12) / purchase price x 100. It is fast and needs only two numbers, which makes it useful for sorting a long list of listings. It ignores every expense, so two properties with the same gross yield can perform very differently.
How do you calculate net rental yield?
Net yield = (yearly rent - yearly operating expenses) / (purchase price + purchase costs) x 100. Including purchase costs, such as closing costs and any immediate repairs, gives a truer picture of the money tied up in the property.
Worked example
With the calculator's example values, a property bought for $250,000 plus $7,500 in purchase costs rents for $2,200 a month:
- Yearly rent: $26,400, so gross yield is 10.56%.
- Subtracting $9,000 of yearly operating expenses leaves $17,400.
- Net yield: $17,400 / $250,000 plus $7,500 = 6.76%.
The gap between the two numbers is the cost of running the property. If you only ever look at gross yield, that gap is the part you are not seeing.
When to use yield instead of cash flow
Use yield to compare properties quickly, before you have loan terms. Once you know how you will finance the purchase, switch to the cash flow and cap rate calculator to see the monthly result after the mortgage.
Frequently asked questions
What is the difference between rental yield and cap rate?
They are close. Net yield and cap rate both compare income after operating expenses with the cost of the property. On this site, net yield divides by price plus purchase costs, while cap rate divides by price alone, so net yield is slightly lower for the same deal.
Should the mortgage be included in operating expenses?
No. Yield measures the property, not the financing. To see the effect of a loan, use the cash flow calculator, which reports cash flow and cash-on-cash return.
What counts as an operating expense?
Property tax, insurance, HOA dues, repairs and maintenance, property management, owner-paid utilities and a reserve for big replacements such as roofs and HVAC. Do not include mortgage principal or interest.
Related
Rental property cash flow and cap rate calculator
Calculate monthly cash flow, cap rate, NOI, cash-on-cash return and DSCR for a rental property, with the formulas and a worked example.
Mortgage payment calculator
Estimate a monthly mortgage payment including principal, interest, property tax, insurance, PMI and HOA, with the amortization formula and a worked example.
Property tax calculator for Texas and Oklahoma
Estimate yearly property tax in Texas (rates per $100, $140,000 school homestead exemption) or Oklahoma (assessment ratio, $1,000 homestead exemption, millage).