How to calculate rental yield

December 16, 2014

Calculating your property’s rental yield or commonly called rental return is an important equation each property investor should be aware of.

There are two key equations:

Gross Yield and Net Yield. Both give you an indication as to the property’s performance as an investment however the gross yield doesn’t take into account any expenses or costs involved in the upkeep and management of a rental property. So we recommend you use the Net Yield equation.

Net Yield (Calculation) =  [(Annual Rent – Annual Expenses) / Purchase Price)] x 100

Example. Property Purchase Price $460,000.00  &   Weekly rent $550

Step 1

Calculate annual rental income (weekly rent x 52)

$550 pw x 52(weeks) = $ 28,000.00

Step 2

Minus annual costs & expenses (rates, insurance, property management etc)

$28,000.00 –  $3,155.00 (costs) = $24,845.00

Step 3

Divide by property purchase price

$24,845.00 / $460,000.00 = 0.054

Step 4

Multiple by 100

0.054 x 100 = 5.4% (net yield)

Feel free to call us if you’d like to talk through your property and how to improve your its yield.