How to calculate rental yield
Gross rental yield is annual rent as a percentage of the property price; net rental yield is the profit after annual costs (property tax, insurance, maintenance and management) as a percentage of the price.[1]
Convert the rent to a yearly figure first. Rents quoted per week, as is common in Australia and parts of the UK, are multiplied by 52, not by 4 × 12: 600 a week is 31,200 a year, and on a 650,000 property that is a gross yield of 4.80%.
| Price | 1,000 / mo | 1,500 / mo | 2,000 / mo | 2,500 / mo |
|---|---|---|---|---|
| 150,000 | 8.00% | 12.00% | 16.00% | 20.00% |
| 250,000 | 4.80% | 7.20% | 9.60% | 12.00% |
| 350,000 | 3.43% | 5.14% | 6.86% | 8.57% |
| 500,000 | 2.40% | 3.60% | 4.80% | 6.00% |
Gross rental yield vs net rental yield
Gross yield is quick to compare between listings; net yield is closer to what the owner keeps. The difference is the running costs a landlord pays: letting and management fees, insurance, repairs, service charges and ground rent on leasehold flats, and any property rates the owner rather than the tenant pays. Australia's Moneysmart lists council and water rates, building and landlord insurance, body corporate fees, land tax, management fees and repairs as the ongoing costs of an investment property.[2] A flat with a high gross yield and a large service charge can have a lower net yield than a house with a modest gross yield.
Net yield here is before mortgage interest and before income tax, so it describes the property rather than the owner's finance. For the return on your own deposit after mortgage payments, use the cash-on-cash return calculator.
Yield, cap rate and the 1% rule
Net yield and the U.S. cap rate are close cousins: both divide income after running costs by the price, and a Texas A&M paper notes that net rental yields are also called cap rates.[1] The difference is mostly vocabulary and what each market puts in the costs line. Gross yield is the inverse of the gross rent multiplier: a 6.25% gross yield is a GRM of 16. The U.S. "1% rule" compares monthly rent with price; 1% a month is a 12% gross yield.
Tax treatment differs by country
- UK: rental profit is taxed as property income, with a small property allowance available to individuals.[3] For residential lets, mortgage interest is not deducted from rental profit; instead individuals receive a tax reduction at the basic rate (20% when the rule was phased in).[4] HMRC's Budget 2026 note says property income rates will rise to 24%, 44% and 49% from April 2027 in England, Wales and Northern Ireland.[5]
- Australia: a property whose deductible expenses exceed its rent is negatively geared, and the loss can be claimed against other income.[6] From 1 July 2027, negative gearing for residential investments is limited to new builds and the 50% capital gains discount is replaced by cost base indexation with a 30% minimum tax rate; properties held when the change was announced on 12 May 2026 keep negative gearing.[7]
- Canada: rental income and expenses go on Form T776.[8]
Because tax rules differ, compare properties on net yield before tax, then work out the after-tax figure for your own situation with a tax adviser.
Yield is not total returnYield ignores changes in the property's price and in rents over time. For a multi-year view, use the investment property calculator.
Frequently asked questions
What is a good rental yield?
There is no universal figure. Yields are usually lower where prices are high relative to rents and higher where they are not, and higher yields often come with more risk or more management. Compare net yields on similar properties in the same area.
How do I calculate rental yield from weekly rent?
Multiply the weekly rent by 52 to get annual rent, then divide by the price. 450 a week on a 520,000 property is 23,400 ÷ 520,000 = 4.5% gross.
Should purchase costs be included?
For net yield on total cost, yes: add stamp duty, legal and survey fees to the price. It gives a truer picture of the return on everything you spent.
Is rental yield the same as cap rate?
Net yield and cap rate both divide income after operating costs by price. Gross yield ignores costs and is closer to the inverse of the gross rent multiplier.
Sources
- Anari, A. Profitability of Texas Homes
- Buying an investment property
- Tax-free allowances on property and trading income
- Changes to tax relief for residential landlords: how it's worked out, including case studies
- Income Tax: changes to tax rates for property and savings income
- How to claim rental expenses
- Tax reform – Boosting home ownership – Reforming negative gearing and capital gains tax
- Guide T4036, Rental Income