Real estate & rental
Rental Yield Calculator
Works yield on a rental, where the annual figure hides how uneven the year is.
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. This uses interest only, not full amortisation, so it measures the income return rather than total cash flow. Principal repayment is not a cost, it is a transfer into equity, but it still leaves the bank account each month.
Get a Free Business AuditHow the calculation works
Annual rent or net operating income against the property's value or total cost, expressed as a percentage. The annual framing is standard and it smooths over the pattern that actually matters to an owner: rent arrives monthly, expenses arrive in lumps, and a yield that looks comfortable annually can be negative in the months when the tax bill and insurance renewal land together.
What moves the number
- Annual rent against annual operating expenses.
- When the large expenses fall during the year.
- Vacancy, which is lumpy rather than spread evenly.
- Value or cost used as the denominator.
Where this one goes wrong
The yield is an annual average and the cash position is monthly, so an owner with a healthy yield and no reserve can still be unable to pay a tax instalment. Model the year by month at least once. The second point is that vacancy does not arrive as a smooth percentage: it arrives as one empty unit for two months, which is why a small portfolio experiences far more volatility than the average suggests.
Before you quote
- Model the year monthly at least once, not just annually.
- Hold a reserve for the months when large expenses land.
- Treat vacancy as lumpy, not as a smooth percentage.
Questions
About this calculator
Why does a good yield still leave me short some months?
Because the yield is an annual average while rent arrives monthly and large expenses arrive in lumps. A tax instalment and an insurance renewal landing together can produce a negative month in a perfectly healthy year, which is what a reserve is for.
How should vacancy be allowed for?
As an annual allowance for planning and as a lumpy event in reality, since vacancy arrives as one unit empty for two months rather than as a smooth percentage. Small portfolios therefore experience far more volatility than the average implies.
Should yield use value or purchase cost?
Purchase cost including acquisition expenses gives the truer return on what was actually committed. Current value is useful for deciding whether to keep holding, since it answers a different question: what the equity is currently earning.
The formula
net yield = net income / price; leveraged return = (net income - interest) / deposit
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How to use this calculator
- Purchase price ($). Enter your own figure; the page starts at $320,000.
- Monthly rent ($). Enter your own figure; the page starts at $2,600.
- Expenses as a share of rent (%). Enter your own figure; the page starts at 32%.
- Deposit (%). Enter your own figure; the page starts at 25%.
- Mortgage rate (%). Enter your own figure; the page starts at 6.5%.
The result updates as you type, so you can try a figure, see what it does to net yield on value, 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 |
|---|---|
| Purchase price | $320,000 |
| Monthly rent | $2,600 |
| Expenses as a share of rent | 32% |
| Deposit | 25% |
| Mortgage rate | 6.5% |
What comes out
| Result | Value |
|---|---|
| Net yield on value main result | 6.63% |
| Gross yield | 9.75% |
| Return on the deposit | 7.02% |
| Net income after expenses | $21,216 |
| After mortgage interest | $5,616 |
Net yield on value is 6.63%, but the return on the 25 deposit is 7.02%, because the mortgage is doing part of the work.
How sensitive the answer is
Holding everything else steady and changing only purchase price, this is what happens to net yield on value. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Purchase price ($) | Net yield on value |
|---|---|
| $160,000 | 13.26% |
| $240,000 | 8.84% |
| $320,000 example above | 6.63% |
| $480,000 | 4.42% |
| $640,000 | 3.31% |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Purchase price ($)
- A money amount, starting at $320,000.
- Monthly rent ($)
- A money amount, starting at $2,600.
- Expenses as a share of rent (%)
- A percentage, between 0 and 80, starting at 32%.
- Deposit (%)
- A percentage, between 0 and 100, starting at 25%.
- Mortgage rate (%)
- A percentage, between 0 and 20, starting at 6.5%.
What the results tell you
| Result | What it is |
|---|---|
| Net yield on value | The headline result. A percentage. |
| Gross yield | A percentage. |
| Return on the deposit | A percentage. |
| Net income after expenses | A money figure. |
| After mortgage interest | A money figure. |
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.
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