Money
How to work out rental yield
Yield tells you how hard a property's rent works compared with its price.
Rental yield is the annual rent as a percentage of the property's price. It lets you compare a unit in one suburb with a house in another, without being distracted by different prices.
Gross and net yield
| Type | Formula |
|---|---|
| Gross yield | Annual rent ÷ purchase price × 100 |
| Net yield | (Rent collected − agent fees − running costs) ÷ purchase price × 100 |
Worked example
A $650,000 property renting for $600 a week collects $31,200 a year if it's never empty. Gross yield is 4.80%. Allow 2 weeks vacant, 7% agent fees and $5,500 for rates, water, insurance and maintenance, and net income falls to $22,400. Net yield is 3.45%.
💡 Pro Tip: Yield is only one half of the story. Growth in the property's value, loan interest, tax and depreciation all matter. A high yield in a slow-growth area can be worse overall than a lower yield where prices rise.
✨ Key Takeaways
- Gross yield ignores costs and vacancy.
- Net yield is the more honest figure.
- Yield doesn't include loan interest or tax.
- Weigh yield against expected growth.
Open the rental yield calculator →
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