Rental Yield Calculator
Calculate gross and net rental yield to compare investment properties and assess income potential.
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How to use this calculator
Gross yield uses total annual rent over the purchase price. Net yield deducts vacancy loss and annual costs from rent, then divides by total investment including purchase costs (stamp duty, legal fees, etc.).
- 1
Enter the property purchase price and the monthly rent you expect to charge or currently receive.
- 2
Add your annual running costs (council rates, insurance, property management, maintenance) and the purchase cost percentage for stamp duty and legal fees.
- 3
Set the expected vacancy in weeks per year; use 0 if you want to ignore lost rent.
Frequently asked questions
What formulas does this tool use?
This tool uses gross yield = (monthly rent × 12) ÷ purchase price × 100. Net yield = (effective rent − annual costs) ÷ (purchase price + purchase costs) × 100, where effective rent is annual rent less vacancy and purchase costs are the price times the purchase-costs percentage.
How is vacancy turned into dollars?
Vacancy weeks are converted at 4.33 weeks per month: lost rent = monthly rent × vacancy weeks ÷ 4.33. Two weeks on $1,800 rent is about $831 of lost rent, so effective rent is $20,769 against $21,600. The field is limited to 0 to 52 weeks.
What does the annual costs field cover?
Whatever you enter, as one yearly total, such as rates, insurance, maintenance and management fees. The tool does not split it up. Mortgage payments and income tax are not part of yield and should be left out.
Where do purchase costs enter the calculation?
Only in net yield, as a percentage added to the purchase price to form total investment. Gross yield ignores them. They are treated as a one-off outlay, not an annual cost, so they widen the denominator and nothing else.
How is the payback period defined?
Total investment ÷ net rental income, in years, with no growth in rent or costs. When net income is zero or negative the tool says it is not recovered rather than giving a number, since the investment would never be paid back at that level.
What if the costs exceed the rent?
Net income turns negative and so does net yield. With the defaults but $30,000 of annual costs, net income is −$9,231 and net yield is −2.99%, while gross yield is unchanged at 7.20% because it ignores costs.
Does it work with a zero price or zero rent?
A purchase price of zero gives a gross yield of 0 instead of an error, and net yield and payback also come out as zero or not recovered. Because both yields use the price you type, a number that excludes renovation or furnishing spending will overstate the return on the full outlay.
What does it not include?
Financing, tax, depreciation, rent growth, capital growth in the property’s value, and any currency conversion: amounts are formatted with a dollar sign regardless of the currency you have in mind. Terms such as stamp duty on the form are just labels for the purchase-costs percentage.
Rental yield: the gross and net figures side by side
How the two yields differ
Gross yield divides twelve months of rent by the purchase price. Net yield makes three changes: it takes lost rent from vacancy off the income, subtracts the annual costs you enter, and divides by the price plus purchase costs. With the defaults ($300,000 price, $1,800 rent, $5,000 of annual costs, 3% purchase costs, two vacancy weeks), gross yield is 7.20%, net income is $15,769 and total investment is $309,000, so net yield is 5.10%. The weekly equivalent of the rent is $415.
Worked example: a higher-priced property
Take a $500,000 property renting for $2,000 a month with $9,000 of annual costs and the other defaults. Annual rent is $24,000 and gross yield is 4.80%. Effective rent is $23,076, net income $14,076 on $515,000 of total investment, and net yield 2.73%. The payback period is 36.6 years. Net yield is well below gross here because the costs and purchase fees come out of a modest rent.
Worked example: removing vacancy and fees
Back on the default property, setting vacancy to zero weeks and purchase costs to 0% lifts net income to $16,600 and total investment falls to $300,000, so net yield rises from 5.10% to 5.53% and payback shortens from 19.6 to 18.1 years. Gross yield stays at 7.20% throughout because it ignores both. If annual costs rise to $30,000 instead, net income turns to −$9,231, net yield is −2.99% and the payback line reads as not recovered.
| Scenario | Gross yield | Net income | Total investment | Net yield | Payback |
|---|---|---|---|---|---|
| Defaults: $300,000, $1,800 rent, $5,000 costs | 7.20% | $15,769 | $309,000 | 5.10% | 19.6 years |
| Defaults, no vacancy, no purchase costs | 7.20% | $16,600 | $300,000 | 5.53% | 18.1 years |
| $500,000, $2,000 rent, $9,000 costs | 4.80% | $14,076 | $515,000 | 2.73% | 36.6 years |
| Defaults with $30,000 annual costs | 7.20% | -$9,231 | $309,000 | -2.99% | Not recovered |
Choosing which yield to quote
Gross yield is useful when two properties are described with the same simple measure, because it needs only price and rent. Net yield is the figure to use when costs differ, since two properties with equal gross yields can leave very different amounts after rates, insurance and fees. Always check that annual costs were built the same way for each property you compare.
What yield cannot tell you
Yield is a single-year ratio with rent and costs held flat. It does not capture loan repayments, tax, future rent increases or changes in property value, so it describes income against the price paid and nothing more. A low figure does not by itself rule out a property, and a high one does not guarantee a good result; treat the numbers as estimates built from what you entered.
Learn more from an authoritative source:
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →