Gross vs net yield
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The formula, a worked example, and the specific way this measure gets misquoted.
How it works
Gross yield counts rent against price. Net yield counts income after costs against what the purchase really cost. The distance between them is everything a listing leaves out.
The formula
gross = annual rent / price net = (rent - vacancy - costs) / (price + buying costs)
- Enter the price and rent to get the gross figure.
- Add the buying costs for your market.
- Add vacancy and running costs to reach the net figure.
Worked example
| Item | Value |
|---|---|
| Gross yield (on price) | 6% |
| Gross yield (on total cost) | 5.74% |
| Net yield | 4.75% |
| Gap between gross and net | 1.25% |
The mistake to avoid
Assuming net is a little below gross. In a high stamp-duty market with normal running costs, a 6% gross yield routinely lands near 3% net — not a trim, closer to half.
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What is the difference between rental yield and cap rate?
Cap rate is net operating income divided by the property's value, and it deliberately ignores financing. Net yield divides the same income by what you actually spent to acquire the property, including stamp duty and fees. Cap rate compares buildings; net yield compares your deals. Neither accounts for the mortgage — that is cash-on-cash return.
Should buying costs be included in rental yield?
For net yield, yes. Stamp duty, legal fees and renovation are money you spent to own the asset, so measuring income against price alone flatters the result — by a full percentage point in markets with high transfer taxes. This calculator shows gross on price and gross on total side by side so the gap is visible rather than assumed.