Rental Yield Calculator
Enter your property value, monthly rent, and annual expenses below to instantly calculate your gross and net rental yield. Use this to evaluate whether a rental property meets your investment return targets.
Results are estimates for informational purposes only. Not financial advice. Full disclaimer.
What is Rental Yield?
Rental yield is the annual return on a rental property expressed as a percentage of the property's value. It is the most fundamental metric for comparing rental investment opportunities because it normalizes returns across properties of different prices and locations. There are two types of rental yield. Gross rental yield uses total rental income before any expenses, giving you a quick top-line comparison. Net rental yield subtracts operating expenses (property taxes, insurance, maintenance, management fees, vacancy allowance) from rental income before calculating the percentage, giving you a more realistic picture of actual returns. A gross yield of 6–10% is generally considered healthy for residential rental properties in the United States, though this varies significantly by market. High-cost cities like San Francisco or New York often show gross yields of 3–5%, while secondary markets in the Midwest or South can achieve 8–12%. Net yields are typically 1.5–3 percentage points lower than gross yields after accounting for standard operating expenses. Rental yield is distinct from total return on investment, which also includes property appreciation, mortgage leverage effects, and tax benefits. A property with a modest 5% net yield might still be a strong investment if it appreciates 4% annually. However, yield is the only component you can reliably predict — appreciation is speculative. Conservative investors focus on yield as the primary metric and treat appreciation as a bonus. Institutional investors (REITs, pension funds, private equity) typically target net yields of 5–7% for stabilized residential properties. Individual investors often accept lower yields (3–5%) in exchange for appreciation potential in growing markets, or seek higher yields (8–12%) in value-add or higher-risk properties. Understanding where a property falls on this spectrum helps you make informed acquisition decisions.
How to Calculate
- Enter the current market value or purchase price of the property
- Enter the monthly rent you charge or expect to charge
- Enter total annual operating expenses (property taxes, insurance, maintenance, management, vacancy reserve)
- Review your gross yield (before expenses) and net yield (after expenses)
- Compare against your target yield and local market benchmarks
Formula
Gross Rental Yield = (Monthly Rent × 12) ÷ Property Value × 100 Net Rental Yield = ((Monthly Rent × 12) − Annual Expenses) ÷ Property Value × 100 Annual expenses typically include: property taxes (0.5–2.5% of value), insurance (0.3–0.5% of value), maintenance (1% of value), property management (8–10% of rent), and vacancy allowance (5–8% of rent). A common rule of thumb is that operating expenses total 35–45% of gross rental income for professionally managed properties.
Example Calculation
For a property valued at $300,000 with monthly rent of $2,000 and annual expenses of $6,000: Annual Gross Income = $2,000 × 12 = $24,000 Gross Rental Yield = $24,000 ÷ $300,000 × 100 = 8.0% Annual Net Income = $24,000 − $6,000 = $18,000 Net Rental Yield = $18,000 ÷ $300,000 × 100 = 6.0% This property has a solid 8% gross yield and a healthy 6% net yield — well within the range that most residential investors target. The $6,000 in annual expenses represents 25% of gross income, which is lean and suggests either low property taxes or limited maintenance costs.
Frequently Asked Questions
What is a good rental yield?
A good gross rental yield is generally 6–10% for residential properties in the US. Net yields of 4–7% are considered solid. However, 'good' depends on your market — a 4% gross yield in San Francisco might be normal, while 4% in a Midwest city would be below average. Compare against local benchmarks, not national averages.
What is the difference between gross and net rental yield?
Gross yield uses total rental income before any expenses are deducted. Net yield subtracts operating expenses (taxes, insurance, maintenance, management, vacancy) from income before calculating the percentage. Net yield is lower than gross yield (since expenses reduce income) and gives a more realistic picture of actual returns. A property with 8% gross yield might have only 5% net yield after expenses.
Does rental yield include mortgage payments?
No. Rental yield measures the property's income performance independent of how it is financed. Mortgage payments are a financing cost, not an operating expense. To evaluate returns including mortgage leverage, use the Cash-on-Cash Return calculator instead, which factors in your actual cash invested and debt service.
How do I estimate annual expenses for a rental property?
Common expense categories include: property taxes (check your county assessor), homeowner's insurance ($800–$2,000/year), maintenance and repairs (budget 1% of property value annually), property management (8–10% of monthly rent if using a manager), and vacancy allowance (budget 5–8% of annual rent for turnover periods). For a quick estimate, assume total expenses equal 35–45% of gross annual rent.
Should I use purchase price or current market value for yield calculations?
Use current market value to evaluate the property as an ongoing investment — this tells you what your money is earning today. Use purchase price to evaluate your original investment decision and track historical performance. Some investors calculate both: 'yield on cost' (purchase price) and 'yield on value' (current market value).
How does rental yield compare to stock market returns?
The S&P 500 has historically returned about 7–10% annually including dividends. A net rental yield of 5–7% is comparable, but real estate also offers leverage (mortgage amplifies returns), tax advantages (depreciation deductions), and typically lower volatility. However, real estate requires active management and has lower liquidity. The comparison is not apples-to-apples — consider total return including appreciation, not just yield.