Find the gross and net rental yield of an investment property to compare it against other opportunities.
Rental yield measures how much annual income a property generates relative to its price. It is one of the fastest ways to compare investment properties before digging into a full cash-flow analysis.
Gross Yield (%) = (Annual Rent ÷ Property Price) × 100
Net Yield / Cap Rate (%) = ((Annual Rent - Annual Expenses) ÷ Property Price) × 100
A $250,000 property renting for $21,000/year with $4,000 in annual expenses has a gross yield of 8.4% and a net yield of 6.8%.
What is a "good" rental yield? Many investors target 5-8% gross yield, though this varies heavily by market.
Is cap rate the same as net yield? They are calculated the same way; "cap rate" is the term more commonly used for commercial property.
Gross yield = (annual rental income ÷ property value) × 100.
Net yield subtracts operating costs for a more realistic return figure.
It varies by market, so compare against similar properties and local averages.