Gross vs Net Rental Yield: How to Calculate It (With Examples)
Gross rental yield divides annual rent by price; net rental yield subtracts running costs first. See both formulas with worked examples and what to include in expenses.
Bellokey Editorial Team
Rental yield tells you the annual income a property produces relative to its price. There are two versions: gross rental yield, which ignores costs, and net rental yield, which subtracts running costs and gives a more realistic picture.
Gross rental yield formula
Gross Yield = (Annual Rent ÷ Property Price) × 100
Example (illustrative): rent of $2,000 a month is $24,000 a year. On a $400,000 property, gross yield = $24,000 ÷ $400,000 = 6%.
Net rental yield formula
Net Yield = ((Annual Rent − Annual Costs) ÷ Property Price) × 100
Using the same property with $6,000 a year in costs: ($24,000 − $6,000) ÷ $400,000 = 4.5%.
What costs to include
- Maintenance and repairs
- Property management fees
- Insurance and service or community charges
- Property taxes where they apply
- Allowance for vacancy between tenants
Sources differ on whether to include mortgage interest, so check which convention a comparison uses. For a consistent comparison, leave financing out and use net operating income, which is how cap rate is calculated.
Rental yield vs cap rate
Net yield and cap rate are close cousins: both measure income against value after operating costs. Gross yield is simpler and flatters the result because it ignores costs. See cap rate vs ROI vs cash-on-cash return for how financing changes the picture.
Using yield to compare markets
Yield varies widely between cities and neighborhoods. Compare like with like (same property type, same cost assumptions) and combine yield with price growth and risk. Browse our city guides to see markets side by side, or ask Bellokey's assistant to shortlist listings by budget.
Frequently asked questions
What is the difference between gross and net rental yield?
Gross yield divides annual rent by price. Net yield subtracts running costs such as maintenance, management, insurance and vacancy before dividing, so it better reflects what you keep.
How do you calculate rental yield?
Divide annual rent by the property price and multiply by 100 for gross yield. For net yield, subtract annual costs from rent first.
Is a higher rental yield always better?
No. High yields can reflect higher risk, weaker locations or higher costs. Compare net yield with growth prospects and vacancy risk.
Related Articles
