How much does a rental property really earn each year? Rental yield puts that answer in one simple number. Rental yield is the yearly rent a property brings in, shown as a percent of what the property is worth. You divide the annual rent by the property value, then multiply by 100. Gross yield uses rent alone, while net yield subtracts running costs first. This guide walks through both with a clear worked example.
Rental yield is annual rent divided by property value, times 100, written as a percent. Gross yield uses rent only. Net yield subtracts yearly costs first, so it is lower and more realistic. Example: $18,000 of yearly rent on a $250,000 home is a 7.2% gross yield, or 4.8% net after $6,000 of costs. Yield lets you compare properties fast, but it is educational only, not investment advice.
What Rental Yield Means
Rental yield tells you how much rent a property earns compared to its value. It turns two big dollar figures into one small percent. That makes very different properties easy to compare.
A higher yield means more rent for each dollar the property is worth. A lower yield means less rent per dollar. Investors use yield as a quick first filter before they dig deeper.
Yield is popular well beyond the United States, and many landlords quote it out of habit. It is a starting point, not the whole story, because it ignores financing and future price changes.
The Rental Yield Formula
There are two versions of the formula, and they share the same shape. Both divide rent by the property value, then multiply by 100 to get a percent.
- Gross yield = (Annual Rent / Property Value) x 100
- Net yield = ((Annual Rent – Yearly Costs) / Property Value) x 100
The only difference is costs. Gross yield uses the full rent. Net yield takes out the yearly running costs first, so it reflects what you actually keep.
How to Calculate Gross Rental Yield
Start with gross yield, because it is the simpler number. You need just two figures: the yearly rent and the property value or price.
First, find the annual rent. If the rent is monthly, multiply it by 12. Then divide that yearly rent by the property value and multiply by 100.
Say a property rents for $1,500 per month. That is $1,500 x 12 = $18,000 per year. If the property is worth $250,000, the math is:
- $18,000 / $250,000 = 0.072
- 0.072 x 100 = 7.2% gross yield
So this property has a gross rental yield of 7.2%. That single number now lets you line it up against other homes quickly.
How to Calculate Net Rental Yield
Net yield is more honest about real life, because owning a rental costs money every year. You subtract those costs from the rent before you divide.
Typical yearly running costs include:
- Property taxes and insurance
- Repairs and maintenance
- Property management fees
- Expected vacancy between tenants
Keep the same property. It earns $18,000 in yearly rent, and say the running costs add up to $6,000 for the year. Subtract first, then divide:
- $18,000 – $6,000 = $12,000 net rent
- $12,000 / $250,000 = 0.048
- 0.048 x 100 = 4.8% net yield
The net yield of 4.8% is well below the 7.2% gross figure. That gap is exactly why costs matter so much.
Gross vs Net Yield Compared
Gross and net yield answer slightly different questions. Gross shows the rent the property pulls in. Net shows what is left after the bills.
Use gross yield for a fast, rough scan of many listings. Use net yield when you are serious about one property and want a truer picture. The table and chart below put the two side by side.
| Point | Gross Yield | Net Yield |
|---|---|---|
| What it uses | Full annual rent | Annual rent minus yearly costs |
| Example result | 7.2% | 4.8% |
| Best for | Fast scans of many listings | A closer look at one property |
| Main limit | Ignores running costs | Still ignores financing and loans |
How Property Price Changes Yield
Yield depends heavily on the value you divide by. When rent stays the same, a higher price means a lower yield. A lower price means a higher yield.
The chart holds rent steady at $18,000 per year and changes only the property value. Watch the gross yield fall as the price climbs.
Where to Get the Numbers
Your yield is only as good as the two figures you plug in. So it pays to estimate rent and value with care.
For annual rent, look at comparable rentals nearby, not an asking price you hope to get. Check what similar units actually lease for, then trim for likely vacancy between tenants. A home that sits empty a month earns eleven months of rent, not twelve.
For value, use the recent purchase price or a current market estimate from sold comparables. Keep one figure and label it, so every property you compare is measured the same way.
When to Trust Net Yield Over Gross
Gross yield almost always overstates your real return, because it pretends costs do not exist. Taxes, insurance, repairs, and management fees are real, and they can take a large bite out of rent.
Lean on gross yield only for a quick first scan. Once a property makes your short list, switch to net yield before you decide anything.
Yield also makes it easy to compare properties or even whole cities at a glance. Many markets show gross yields somewhere in the low-to-mid single digits, though that range is only illustrative and shifts with local prices and rents. Always check current figures for your own market.
How Investors Use Rental Yield
Yield shines as a comparison tool. Because it is a percent, you can stack a cheap small home against a pricey large one in seconds. The higher yield earns more rent per dollar invested.
Still, yield is only one lens. It does not include your mortgage, your down payment, or future price growth. For a fuller view, pair it with other metrics and a careful deal review.
Net yield is close to the cap rate, but yield is often quoted gross and measured against the price, while cap rate uses net operating income; see Cap Rate Explained for Real Estate Investors for that version. To size up rent against price another way, read Gross Rent Multiplier Explained. And for the full picture, including loans and cash flow, see How to Analyze a Rental Property Deal.
You can run these numbers fast with our Real Estate ROI Calculator, which handles rent, costs, and value in one place.
Ready to turn rent and price into a yield? Try our Real Estate ROI Calculator to compute gross and net figures in seconds, then compare properties side by side with confidence.
Frequently Asked Questions About Rental Yield
What Is a Good Rental Yield?
There is no single right answer, because it depends on the market, the property type, and your costs. Many investors look at both gross and net figures together. A high gross yield can shrink fast once costs come out. Always compare similar properties in the same area, and remember this is educational only, not advice.
How Do I Calculate Gross Rental Yield?
Take the yearly rent and divide it by the property value, then multiply by 100. If rent is monthly, multiply it by 12 first. For example, $18,000 of yearly rent on a $250,000 home is $18,000 / $250,000 = 0.072, which is a 7.2% gross yield. That percent makes quick comparisons easy.
What Is the Difference Between Gross and Net Yield?
Gross yield uses the full rent, so it is higher and simpler. Net yield subtracts yearly running costs like taxes, insurance, repairs, and management first, so it is lower and more realistic. In our example, the gross yield is 7.2% and the net yield is 4.8% after $6,000 of costs on the same property.
Should I Use the Purchase Price or Current Value?
Either can work, as long as you stay consistent. Many people use the purchase price right after buying, then switch to current value later. Using current value shows the yield a new buyer would see today. Just label which figure you used so your comparisons stay fair across different properties.
Does Rental Yield Include My Mortgage?
No. Rental yield measures rent against the property value, so it leaves out loans and financing entirely. That is why two investors can see the same yield but very different cash flow. For a metric that factors in your loan and down payment, review a full deal analysis instead of yield alone.
Is Rental Yield the Same as Cap Rate?
They are close but not identical. Net yield and cap rate both compare income to value, yet yield is often quoted gross and measured against price, while cap rate uses net operating income. If you want the income-based version used in many deals, read our separate guide on cap rate for the details.
Why Does Yield Fall When the Price Goes Up?
Because price is the bottom of the formula. When rent stays the same but the value rises, each dollar of property earns a smaller share of rent. In our chart, $18,000 of rent is a 9.0% yield at $200,000 but only 5.0% at $360,000. Cheaper homes with solid rent often show higher yields.
Sources
Authoritative Sources Used in This Article
This article is for general education only, not financial or investment advice. Real estate returns depend on price, rent, costs, financing, and local market conditions that vary and change, so run your own numbers and consult a professional. Reviewed for accuracy by Prof. Dr. Khalil Mudassar, PhD. Last updated September 12, 2026.
Author
Shakeel Muzaffar is the Founder and Editor-in-Chief of MultiCalculators.com, bringing over 15 years of experience in digital publishing, product strategy, and online tool development. He leads the platform's editorial vision, ensuring every calculator meets strict standards for accuracy, usability, and real-world value. Shakeel personally oversees content quality, formula verification workflows, and the platform's commitment to publishing tools that are genuinely useful for students, professionals, and everyday users worldwide.
