How to Calculate Rental Yield
What is Rental Yield?
Calculates rental yield (net return on rental property investment) comparing income to property value.
Formula
Gross Yield = Annual Rent ÷ Property Value × 100%
Step-by-Step Guide
- 1Gross Yield = Annual Rent ÷ Property Value × 100%
- 2Net Yield = NOI ÷ Property Value × 100%
- 3Includes (net) or excludes (gross) operating expenses
- 4Typical 2-5% net yield on appreciating properties
Worked Examples
Input
Rent $2k/mo, price $300k
Result
8% yield
Common Mistakes to Avoid
- ✕Using gross yield for decision-making (net more accurate)
- ✕Not accounting for vacancies
- ✕Ignoring appreciation in yield calculation
Frequently Asked Questions
Why do yields vary so much by location?
Low-yield markets (expensive cities) bet on appreciation; high-yield markets rely on income.
Is higher yield always better?
No; high yield (8-10%) often signals high risk or depressed market; balance risk and return.
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