Rental yield is the annual rent a property produces, expressed as a percentage of what the property is worth. It is the single number that separates property as an investment from property as a place to live.
This calculator produces both gross and net yield, because the gap between the two is where most property investment cases quietly fall apart.
Gross yield and net yield
Gross yield is the figure quoted in listings and brochures. It is annual rent divided by property value, and it ignores every cost of ownership. It is useful only for rough comparison between properties, never for deciding whether to buy one.
Net yield subtracts the costs you actually pay: maintenance, property tax, insurance, society charges, letting fees, repairs and the rent lost while the property sits empty between tenants. It is a materially smaller number and it is the one that matters.
Gross yield = (Annual rent ÷ Property value) × 100
- ·Net yield = ((Annual rent − Annual costs) ÷ Total purchase cost) × 100
- ·Total purchase cost includes stamp duty, registration and brokerage — not just the sale price
- ·Annual costs include a realistic vacancy allowance, not a best case of zero
A worked example
A property costs 10,000,000 and rents for 25,000 a month. Gross yield looks like 300,000 ÷ 10,000,000 = 3.0%.
Now add reality. Stamp duty and registration added 600,000 at purchase, so your actual capital committed is 10,600,000. Society maintenance and property tax run 40,000 a year, repairs average 25,000, and the flat sits empty roughly one month in twelve, costing another 25,000 in rent.
Net income becomes 300,000 − 90,000 = 210,000, against 10,600,000 committed. Net yield is 1.98% — barely two-thirds of the gross figure, and well below what a low-risk fixed deposit pays with none of the illiquidity or tenant risk.
| Measure | Calculation | Result |
|---|---|---|
| Gross yield | 300,000 ÷ 10,000,000 | 3.00% |
| Net income | 300,000 − 90,000 costs | 210,000 |
| Capital committed | 10,000,000 + 600,000 duty | 10,600,000 |
| Net yield | 210,000 ÷ 10,600,000 | 1.98% |
What a low net yield actually means
A net yield of around 2% does not automatically make a property a bad investment. It does mean that the investment case rests almost entirely on capital appreciation rather than on income, and that is a considerably less certain proposition.
If prices rise steadily, the total return can be excellent, particularly with leverage amplifying it. If prices stagnate for several years — which property markets do, sometimes for a decade — you are holding an illiquid asset yielding less than a savings account while paying maintenance on it.
The honest comparison is not rental yield against zero. It is rental yield plus expected appreciation, against what the same capital would have earned in a diversified portfolio, adjusted for the fact that one of those options can be sold in a day and the other cannot.
Leverage cuts both ways
A mortgage magnifies both outcomes. Borrowing at 8.5% to hold an asset yielding 2% net means the rent does not cover the interest, and you are funding the shortfall monthly in the expectation that appreciation makes up the difference. Model that gap explicitly with the rent vs buy calculator before committing.
Costs people forget to include
- ·Vacancy: Even a well-located property is empty between tenants. One month a year is a realistic default; assuming zero is not.
- ·Letting and management fees: Typically one month of rent per tenancy for finding a tenant, plus a percentage of rent if managed.
- ·Major repairs: Roofs, plumbing and waterproofing do not fail annually, but averaged across years they are a real cost that must be provisioned.
- ·Tax on rental income: Rent is taxable income. A yield calculated pre-tax overstates what actually reaches you, particularly in higher brackets.
- ·Transaction costs on exit: Brokerage and capital gains tax on sale. Compute the latter with the capital gains tax calculator.
Using yield to compare properties
Yield is most useful as a relative measure. Two properties in the same city with similar appreciation prospects but yields of 2% and 3.5% are meaningfully different investments, and the difference compounds over a holding period.
As a general pattern, smaller units and less central locations tend to produce higher rental yields but weaker capital appreciation, while premium central property does the reverse. Which you want depends on whether you are buying for income now or for capital later — and being explicit about that before you buy prevents a good deal of disappointment afterwards.
Last reviewed August 2, 2026 · How we check our calculators