What is a good rental yield?

5-8% gross is generally good. Under 4% may not cover expenses. Over 8% is excellent but may indicate higher risk. Net yield of 4-6% after expenses is solid.

Capitalization rate is similar to net rental yield — annual net operating income divided by property price. It helps compare properties regardless of financing.

Rental Yield Calculator

Calculate gross and net rental yield on investment properties. Compare different properties to find the best return. Enter price, monthly rent, and annual expenses.

What Is Rental Yield?

Rental yield measures annual rental income as a percentage of the property's purchase price or market value. It is the most common metric for comparing buy-to-let investment properties. Gross yield uses the total rent collected before any deductions. Net yield subtracts operating expenses such as insurance, maintenance, property management fees, and vacancy losses, giving you a more realistic picture of actual returns.

Rental Yield Formulas

Gross Yield = (Annual Rent / Property Price) × 100

Net Yield = ((Annual Rent − Annual Expenses) / Property Price) × 100

Gross vs Net Yield

Gross yield is quick to calculate and useful for initial property screening, but it can be misleading. A property with 7% gross yield might deliver only 4% net yield after accounting for repairs, insurance, property taxes, and management fees. Always calculate net yield before making a purchase decision. Factor in a vacancy rate of 5-10% to account for periods when the property sits empty between tenants.

What Makes a Good Property Investment

A gross yield of 5-8% is generally considered solid, while anything above 8% is excellent but may indicate higher-risk locations. Net yield of 4-6% after all expenses is a strong result. Compare yield against alternative investments like index funds or bonds. Also consider capital appreciation potential, local rental demand, tenant quality, and future development plans in the area when evaluating a property.