Rental yield calculator
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The formula, a worked example, and the specific way this measure gets misquoted.
How it works
Rental yield expresses a year of rent as a percentage of what the property cost. It is the first number anyone asks for, and the one most often quoted in its most flattering form.
The formula
gross yield = annual rent / price net yield = NOI / total invested
- Enter the purchase price and the monthly rent.
- Pick your market so stamp duty and fees are included.
- Compare gross on price with net on total invested.
Worked example
| Item | Value |
|---|---|
| Purchase price | $300,000.00 |
| Monthly rent | $1,500.00 |
| Annual rent | $18,000.00 |
| Gross yield (on price) | 6% |
| Gross yield (on total cost) | 5.74% |
The mistake to avoid
Quoting gross yield on the asking price and treating it as what you will earn. It excludes stamp duty, legal fees, vacancy and every running cost. The honest version divides by what the purchase actually cost, and it is always the lower number.
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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.