Rental Yield Calculator (Gross + Net)

What is rental yield?

Rental yield is the annual rental income produced by an investment property, expressed as a percentage of the property's purchase price. It comes in two flavours:

• Gross yield = annual gross rent ÷ price × 100. The headline number you see in property listings and brokerage marketing materials.
• Net yield = NOI (rent after vacancy and operating expenses) ÷ price × 100. The honest number — what actually lands in your pocket each year before financing and tax.

Net yield is mathematically identical to cap rate; the only difference is convention. UK and European buy-to-let markets prefer "yield" as a percentage of price; US commercial markets prefer "cap rate" as a ratio. Same calculation, same meaning.

The formulas

Gross yield = (Monthly rent × 12) ÷ Price × 100
Effective gross income (EGI) = Annual rent − Vacancy & credit loss
NOI = EGI − Operating expenses
Net yield = NOI ÷ Price × 100

Typical city benchmarks (rough, 2026)

Why such variation? Appreciation markets (London, Paris, Berlin) trade at low yields because investors are paying for expected capital growth; cash-flow markets (UK regional, US Midwest) trade at high yields because investors expect little appreciation and need current cash to compensate.

Two estimate methods for expenses

If you have a real expense estimate (property tax, insurance, management, repairs, reserves) totalled up, use the absolute input. If you're screening many deals and don't yet have an itemised expense estimate, use the % of EGI slider:

• 20–30% — new build, low-cost-of-ownership location (low property tax, no HOA), self-managed.
• 30–40% — typical stabilised residential rental, professionally managed.
• 40–50% — older building, higher-property-tax area, HOA/condo fees.
• 50%+ — Class C, deferred maintenance, owner-paid utilities, high-tax jurisdiction.

A common rule of thumb in US buy-to-let is the 50% rule: operating expenses tend to equal about half of gross rent in residential rentals. It's a quick screen, not a precise number — use it for first-pass triage, then build a real expense estimate for any property you're seriously considering.

Common mistakes

• Comparing gross yields across regimes without accounting for tax / regulation. A UK buy-to-let with mortgage-interest-deduction limitations has very different net economics than a Texas single-family rental with full Section 168 depreciation. Net yield doesn't capture that; you need a full cash-on-cash + tax model.
• Ignoring leasehold ground rent. UK leasehold properties have ongoing ground rent and service charges that can eat 1–2% of yield. Build these into your expense estimate.
• Anchoring on gross yield. A "7% yield" headline that becomes 3.5% net after honest expenses is a different deal. Verify net before getting excited.
• Treating net yield as a forecast. It's a snapshot of today's rent vs price. Rents may grow (which raises the effective yield-on-cost over time); maintenance bills may spike (which lowers it). Stress-test both.
• Mixing nominal and real. If you're modelling against a 6% required yield "real" but using nominal rent and price inputs, you're inadvertently demanding a much higher hurdle. Pick one regime.

Gross vs net vs cap rate vs ROI

Pairs with

• cap-rate — the same calculation, US convention.
• noi-calculator — full operating expense breakdown.
• gross-rent-multiplier — the reciprocal of gross yield (1/yield × 100).
• property-irr — multi-year return including appreciation.

Worked example

A £300,000 flat renting for £1,500/month earns £18,000 a year, so the gross yield is 18,000 ÷ 300,000 = 6.0% — the headline figure listings love to quote. Now the honest version: knock off 5% vacancy (£900) and 35% operating expenses, and NOI falls to about £11,100, making the net yield 11,100 ÷ 300,000 = 3.7%. That gap between 6.0% and 3.7% is exactly what the marketing leaves out.

FAQ

Gross or net yield — which matters? Net, every time, for an actual buy decision. Gross yield ignores vacancy and every running cost, so it flatters the property. Use gross only to screen listings quickly, then run net before committing.

Does yield include my mortgage? No — like cap rate it's unlevered, measuring the property's own income against its price. Financing costs are layered on separately as cash-on-cash return.

What's a decent net yield? Wildly location-dependent: prime city-centre flats often net 3–4%, while higher-risk regional markets can net 6%+. Compare against local comparables and the risk-free rate, not a headline target.

Isn't total return higher than yield? Usually — yield captures only rental income. Capital appreciation is on top of it (and can dwarf it), but it's also uncertain and unrealised until you sell. Yield is the part you can bank each year.

How it works

The gap between gross and net yield is where the truth lives. Gross yield is just annual rent ÷ price — the number listings advertise, because it is always the flattering one. Net yield subtracts vacancy and every operating cost first, which makes it identical to a cap rate. The size of that gap is itself a signal: in high-tax, high-service-charge, or management-heavy markets, a headline 6% gross can collapse to a 3% net, while a lean single-let might keep most of its gross. So the spread between the two numbers tells you how expensive the property is to run, not just to buy. And low-yield cities are not automatically bad — London, Paris and Berlin price in expected appreciation, so investors accept thin yields as the cost of a growth bet.

Common mistake

Comparing a gross yield in one market with a net yield in another — an apples-to-oranges error that flatters whichever property you quoted gross. Always compare like with like. The second trap is forgetting leasehold costs: ground rent, service charges, and sinking-fund contributions can quietly turn an attractive gross yield into a barely-positive net one, and they never show up in the listing's advertised figure.

Related

Since net yield is cap rate, cross-check with the cap rate calculator, screen a shortlist fast with the gross rent multiplier, and build the net figure properly from a full NOI. For the three yield numbers every landlord should separate, read rental yield — the three numbers that matter.