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# Free Rental Yield Calculator

### Get Started With Our Rental Yield Calculator

Calculate your cashflow, and return on investment period by entering your property price, monthly rent, annual expenses, and vacancy rate below.

Property Price

\$

Monthly Rent

\$

Annual Expenses

\$

Vacancy Rate (%)

0.00%

Per Year

0.00%

Per Year

\$0.00

Per Year

0 Years

of Investing

## Calculating Rental Yield

#### Estimating a Properties Performance

Before you purchase a rental property you will want to know if itâ€™s a good investment. You can do this by calculating your rental yield.

To estimate the kind of returns an investment property will give you, you need to know the purchase price and estimated rental return for your property as well as an estimate for your expenses. You can get rental estimates from websites like .

Once youâ€™ve purchased a property you will want to keep an eye on your rental yield to ensure that you are charging the right amount and that your property is making the returns you need to turn a profit.

Hopefully, when you calculate a current rentals yield this will match or exceed your previous calculations.

## What is Rental Yield

Rental yield is a measure of how much cash an income generating asset produces each year as a percentage of that assetâ€™s value. For real estate, it is the rental income as a percentage of the propertyâ€™s value.

There are two kinds of yields youâ€™ll hear about: gross yield and net yield.

## Gross Yield

This is the income return on your investment before any expenses, outgoings or possible rental vacancies are taken into account. Gross yield also does not take interest rates into account.

Gross rental yield is commonly used when looking at returns, as it is simple to calculate and lets you easily compare properties with different values and rental returns.

## How to Calculate Gross Rental Yield

You take the ‘Annual rental income’ and divide by the ‘Property value’. Then multiply this number by 100 to get a percentage value.

### Gross Yield Example:

Property value \$600,000. Expected rent \$3,000 a month.

\$3,000 x 12 = \$36,000 (annual rental income)

(\$36,000 /\$600,000) x 100 = 6% gross rental yield

## Net Yield

This is, in many ways, a much more useful number. This takes into account any expenses or other outgoings, such as maintenance costs, mortgage payments, and insurance. Net yield is sometimes referred to as â€˜rate of returnâ€™.

## How to Calculate Net Rental Yield

Take the ‘Annual rental income’ and subtract the ‘Annual expenses’. Then divide this number by the ‘Property value’ and then multiply by 100 to get a percentage value.

### Net Yield Example:

Property value \$600,000, expected rent \$3,000 a month and expenses/loss \$6000.

\$3,000 x 12 = \$36,000 (annual rental income)

((\$36,000 – \$6000)/\$600,000) x 100 = 5% Net Rental Yield

### Cash Flow

A rental asset should have a positive cash flow even after surprise expenses. You will want to calculate how quickly you can make a property positive after your initial expenses immediately after purchasing the property (eg. renovations).

This should be considered on a yearly basis as well as an overall basis to give yourself the best possible understanding of your property’s cash flow.

### Payback Period

This is how long it will it take to breakeven on your investment. We work this out in our calculator from your cash flow, vacancy rate, and property purchase price. However, you should also consider mortgage interest rates when calculating this.

## What is a Good Rental Yield?

So, the question weâ€™ve all been waiting for. What is a good rental yield? What should you be aiming for?

There is no universal answer to this question, as determining the strength of an investment depends on numerous factors. In an ideal world you’d aim for 7-8% however, it is definitely worth noting though, that this isnâ€™t the one and only answer.

Other factors that should be taken into consideration, include but are not limited to:

###### Occupancy Rates

Is the property in a desirable location, near amenities, near public transport? etc.

###### Holding period

How long do you plan on holding the property?

###### Capital Gains

What capital gains can be expected? Is the purchase price good? Have you done work on the property?

###### Investment Strategy

What is your overall investment strategy and how does this property play into your long term financial goals?

###### Risks

Are there any local developments that might damage the property of the value eg. plans to further develop a nearby airport?

Are there any signs indicating a property bubble in the area? Is the state introducing tighter rental regulations?

A high rental yield is certainly a good thing to have. However, the best investors consider as many facets of their investment as possible to help themselves achieve the best returns from their investment portfolio in the long run.

### Increasing Cash Flow for a Good Rental Yield

• Choose markets with high rental demand and manage your leases well;
• Spend money to make money: Simple renovations like a fresh repaint will allow you to enjoy premium rent;
• Rent by the room;
• Increase marketing efforts to avoid vacancy;
• Utilize all income producing assets in your property (parking lot, laundry room, etc).

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