Real estate & rental
Real Estate Rental Yield Calculator
Works rental yield, where gross and net are different numbers and only one is informative.
Result
An arithmetic tool, not investment advice. Property returns depend on the local market, the condition of the building, financing terms and tax position, none of which a calculator can see. Verify the income and expense figures against actual statements rather than a seller's projection. Vacancy, repairs and capital expenditure are the three line items most often left out of a listing's numbers, and together they routinely account for 20% to 30% of gross rent. A pro forma that omits them is a marketing document, not an analysis. Yield on total cost, which includes purchase costs, is the honest denominator for judging a new acquisition, because that is the money actually committed.
Get a Free Business AuditHow the calculation works
Gross yield is annual rent divided by the property value; net yield is net operating income divided by the value or by the total acquisition cost including purchase costs. The gap between the two is the entire operating expense load, which in practice is a substantial share of rent and varies widely by property type and location.
What moves the number
- Operating expenses, which separate gross from net.
- Whether acquisition costs are included in the denominator.
- Property tax, which varies enormously by jurisdiction.
- Vacancy allowance.
Where this one goes wrong
Gross yield is the figure quoted in advertisements because it is the larger one, and comparing a gross yield in one market against a net yield in another produces a conclusion that is simply wrong. Fix one definition before comparing anything. Including purchase costs in the denominator also lowers the yield and is the more honest basis, since that money was genuinely required to acquire the income.
Before you quote
- Compare gross against gross and net against net, never mixed.
- Include acquisition costs in the denominator for a true figure.
- Use a realistic vacancy allowance in net yield.
Questions
About this calculator
What is the difference between gross and net yield?
Gross divides annual rent by value; net divides net operating income by value. The gap between them is the whole operating expense load, which is a substantial share of rent, so the two figures are not close and should never be compared against each other.
Which yield is quoted in listings?
Gross, generally, because it is the larger number. That makes it important to establish which basis any quoted figure uses before comparing properties or markets, since a gross against net comparison produces a conclusion that is simply wrong.
Should purchase costs be in the denominator?
It is the more honest basis, since that money was genuinely required to acquire the income stream. Excluding them raises the apparent yield without changing anything real, which is why a yield on price alone flatters a purchase with high transaction costs.
The formula
gross yield = annual rent / value; net yield = (effective rent - expenses) / value
Put this calculator on your site
Free to embed. Paste this where you want it to appear. It stays up to date automatically because it loads from BDEVY.
Please keep the attribution line. It is the only thing we ask in return.
How to use this calculator
- Property value ($). Enter your own figure; the page starts at $385,000.
- Monthly rent ($). Enter your own figure; the page starts at $3,500.
- Vacancy allowance (%). Enter your own figure; the page starts at 7%.
- Annual operating expenses ($). Enter your own figure; the page starts at $13,600.
- Purchase costs ($). Enter your own figure; the page starts at $14,000.
The result updates as you type, so you can try a figure, see what it does to net yield, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Property value | $385,000 |
| Monthly rent | $3,500 |
| Vacancy allowance | 7% |
| Annual operating expenses | $13,600 |
| Purchase costs | $14,000 |
What comes out
| Result | Value |
|---|---|
| Net yield main result | 6.61% |
| Gross yield | 10.91% |
| Net annual income | $25,460 |
| Yield on total cost | 6.38% |
| Gap between gross and net | 4.30% |
Gross yield is 10.91% and net yield 6.61%. Vacancy and expenses account for the 4.30% difference, which is why advertised gross yields are close to meaningless.
How sensitive the answer is
Holding everything else steady and changing only property value, this is what happens to net yield. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Property value ($) | Net yield |
|---|---|
| $192,500 | 13.23% |
| $288,750 | 8.82% |
| $385,000 example above | 6.61% |
| $577,500 | 4.41% |
| $770,000 | 3.31% |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Property value ($)
- A money amount, starting at $385,000.
- Monthly rent ($)
- A money amount, starting at $3,500.
- Vacancy allowance (%)
- A percentage, between 0 and 50, starting at 7%.
- Annual operating expenses ($)
- A money amount, starting at $13,600.
- Purchase costs ($)
- A money amount, starting at $14,000.
What the results tell you
| Result | What it is |
|---|---|
| Net yield | The headline result. A percentage. |
| Gross yield | A percentage. |
| Net annual income | A money figure. |
| Yield on total cost | A percentage. |
| Gap between gross and net | A percentage. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
Keep going
Related calculators
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.