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Free TrialUse this free rental yield calculator to find the gross and net rental yield on any rental property. Enter the property value and a year of rent, then add vacancy and operating expenses to see your net operating income and how your net yield compares with common benchmarks.
How to use this rental yield calculator
- Enter the property value. Use the price you would pay to judge a purchase, or what the property would sell for today to check one you already own.
- Enter the annual rent. Use a full year of rent as if the property were never empty: monthly rent × 12. The vacancy rate takes care of empty months, so don't lower the rent for them yourself or they get counted twice.
- Add vacancy and operating expenses. Fill in what you expect to pay in a year for maintenance, management, property taxes, insurance and anything else it costs to run the property. Leave out mortgage payments.
Results update as you type. They appear once both required fields are filled in, and any expense left blank counts as $0.
How to calculate rental yield
Rental yield is a year of rental income as a percentage of what the property is worth. It lets you compare rentals at different prices on equal terms, and it comes in two forms: gross and net.
Gross rental yield
Gross yield uses the full rent before any costs. It's quick to work out from a listing, which makes it handy for screening many properties, but it says nothing about what the property costs to run. A $250,000 home renting for $2,000 a month brings in $24,000 a year: $24,000 ÷ $250,000 × 100 = 9.6% gross yield.
Net rental yield
The part in parentheses is your net operating income (NOI): the rent left after vacancy and the costs of running the property.
- Annual rent is scheduled rent: what you would collect in a year with no empty months.
- Vacancy loss is annual rent × your vacancy rate, the rent you expect to lose to empty months between tenants.
- Operating expenses are the yearly costs of keeping the property rented: maintenance and repairs, management fees, property taxes, insurance, and costs such as utilities you pay, HOA dues and landscaping.
For the same $250,000 home with $6,000 a year in expenses and no vacancy: ($24,000 − $6,000) ÷ $250,000 × 100 = 7.2% net yield.
What to leave out of expenses
Net yield measures the property, not how you paid for it, so leave out:
- Mortgage payments. Principal and interest depend on your loan. Two buyers of the same house get the same net yield whether one paid cash and the other borrowed.
- Depreciation. It's a tax deduction, not money you spend. IRS Publication 527, Residential Rental Property, explains how it works for rentals.
- Major improvements. A new roof or furnace is a capital expense, which most landlords cover from a separate reserve. The property maintenance cost calculator helps you budget the routine repairs that do belong here.
To see your return after the mortgage, on the cash you actually put in, use the rental property ROI calculator.
Net rental yield and cap rate
Net yield as this calculator works it out, net operating income divided by the property's value, is the same calculation as the capitalization rate (cap rate) investors use. If a seller or agent quotes a cap rate, you can compare it with your net yield, as long as both count vacancy and the same expenses.
Example: a $300,000 single-family rental
The rent is $2,200 a month, the landlord expects about 5% vacancy, and yearly expenses come to $10,200. Enter these numbers and the calculator shows the same results.
| Line | Per year |
|---|---|
| Annual rent ($2,200 × 12) | $26,400 |
| Vacancy loss (5% of $26,400) | −$1,320 |
| Maintenance and repairs | −$2,400 |
| Property management | −$2,100 |
| Property taxes | −$3,600 |
| Insurance | −$1,500 |
| Other expenses | −$600 |
| Net operating income | $14,880 |
| Result | Working | Calculator shows |
|---|---|---|
| Gross rental yield | $26,400 ÷ $300,000 × 100 | 8.80% |
| Net rental yield | $14,880 ÷ $300,000 × 100 | 4.96% |
| Monthly net operating income | $14,880 ÷ 12 | $1,240.00 |
| Annual expenses | $2,400 + $2,100 + $3,600 + $1,500 + $600 | $10,200 |
A 4.96% net yield falls in the average band. The 3.84-point gap between gross and net yield is what vacancy and expenses cost this property. The $1,240 a month is before the mortgage: if the loan payment is higher than that, the property costs the owner money each month.
What is a good rental yield?
There's no official standard. What counts as good depends on the market, the property and how much risk you're willing to take. The calculator rates net yield against these common rules of thumb.
Net rental yield benchmarks
Use these ranges for net yield only. Gross yield is always higher because nothing has been taken off, so a 9% gross yield can easily be a 5% net yield once vacancy and expenses come out. A net yield of exactly 0.00% means the rent just covers vacancy and expenses, and below that the property loses money before any mortgage payment.
A very high yield isn't automatically a good deal. Homes in cheaper or weaker areas often show high yields because prices are low next to the rent, and they can bring more vacancy, more repairs and slower growth in value. Rental yield also leaves out appreciation, so a lower-yielding home in a growing area can still be a sound investment. Compare against similar rentals nearby rather than a single national number.
How to use your results
- Compare properties. Run each one with the same vacancy rate and expense assumptions so the yields line up.
- Check the rent against the mortgage. Monthly net operating income is what's left before any loan payment. If your mortgage payment is higher, the property will cost you money each month even with a healthy-looking yield.
- Test your assumptions. Raise the vacancy rate or expenses to see how much room you have. The rental vacancy rate calculator can help you pick a realistic vacancy figure.
- Plan for taxes. Rental yield is before income tax. The rental income tax calculator estimates what you may owe on the profit.
- Revisit it each year. Rent, taxes and insurance change. Re-run the numbers with what you actually collected and spent last year. Tracking rent and expenses per property in RentPost keeps those figures at hand.
Frequently asked questions
What is a good rental yield?
By common rules of thumb, a net rental yield of 4% to 6% is average, 6% to 8% is good and 8% or more is excellent, measured after vacancy and operating expenses but before mortgage payments. Gross yields run higher. What counts as good depends on the market, and a very high yield can point to a riskier area, so compare with similar rentals nearby.
What is the difference between gross and net rental yield?
Gross rental yield divides a full year of rent by the property value. Net rental yield first takes off the rent lost to vacancy and the costs of running the property, such as taxes, insurance, repairs and management, so it shows what the property actually earns. Net yield is always lower unless the property has no vacancy and no expenses.
How do I calculate rental yield?
For gross yield, multiply the monthly rent by 12, divide by the property value and multiply by 100. For net yield, subtract a year of vacancy loss and operating expenses from the annual rent before dividing. A $300,000 home renting for $2,200 a month has a gross yield of 8.8%; with 5% vacancy and $10,200 of yearly expenses, its net yield is 4.96%.
Should I include my mortgage payment when calculating rental yield?
No. Rental yield measures how the property performs no matter how you paid for it, so leave out mortgage principal and interest. To see your return on the cash you put in, after the mortgage, use our rental property ROI calculator.
Is net rental yield the same as cap rate?
When net yield counts vacancy and all operating expenses, it is the same calculation as the capitalization rate (cap rate): net operating income divided by the property's value. Cap rate is the more common term in commercial real estate; rental yield is more common among landlords of homes and small buildings.
Should I use the purchase price or the current market value?
Use the price you would pay to judge a property you are thinking of buying. Use what the property would sell for today to see what a property you already own earns on its current worth. Some investors add closing costs and upfront repairs to the price to see the yield on everything they put in.
How does vacancy affect rental yield?
Each empty month costs about 8% of a year's rent (1 month out of 12), and a 5% vacancy rate works out to about 18 empty days a year. Vacancy lowers net yield but not gross yield, which assumes the property is rented all year. Our rental vacancy rate calculator works out the rate from your own vacant days.
