Rental Yield Calculator
This rental yield calculator shows the gross and net yield of a property and its price-to-rent ratio. A flat bought for 250,000 that rents for 900 a month, with 3% buying costs and 1,200 of yearly expenses, yields 4.32% gross and 3.73% net, and pays back in about 26.8 years.
Example: Purchase price 250,000 · Buying costs 3 % · Rent per month 900 · Yearly expenses the owner pays 1,200 · Vacancy / lost rent 0 % → Gross yield: Gross yield: 4.32%. Source: Wikipedia – Gross rent multiplier: price divided by annual rent. Updated: .
How it is calculated
How to calculate rental yield – the formulas
- Gross rental yield = annual rent ÷ purchase price × 100. With 10,800 annual rent and a price of 250,000 that is 4.32%.
- Net rental yield = (annual rent after vacancy − expenses) ÷ (price + buying costs) × 100. Here (10,800 − 1,200) ÷ 257,500 = 3.73%.
- Price-to-rent ratio = price ÷ annual rent, the reciprocal of the gross yield: 250,000 ÷ 10,800 = 23.1 years of rent.
Payback
Total investment divided by net income shows after how many years the money has been earned back on paper: 257,500 ÷ 9,600 = 26.8 years. Rent increases, price growth and financing costs are not included.
Which costs to include
Count the costs the owner carries: property management, maintenance reserve, service charges that cannot be passed on, and lost rent. Mortgage interest, repayments and income tax are left out because they depend on your financing and personal situation.
Limits
The yield is a snapshot before tax and before financing. It ignores price changes, rent rises, renovations and interest rate moves. It helps compare properties and is not investment advice.
Frequently asked questions
How do you calculate rental yield?
Divide the annual rent by the purchase price and multiply by 100. For net yield subtract the owner’s expenses and divide by price plus buying costs.
What is the difference between gross and net rental yield?
Gross yield compares only rent and price. Net yield also counts buying costs, running costs and vacancy, so it is lower.
What does the price-to-rent ratio mean?
It tells you how many years of rent the price equals. A ratio of 25 matches a gross yield of 4%.
What is a good rental yield?
There is no fixed limit. Compare the net yield with your financing costs, the risk of the location and alternative investments.
Which costs belong in the net yield?
Management, maintenance, reserves, costs you cannot pass on and lost rent. Interest and tax stay out.
Sources and legal basis
- Wikipedia – Gross rent multiplier: price divided by annual rent
- Wikipedia – Capitalization rate: net operating income divided by property value
As of: · Editorial policy
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