Gross Rental Yield & Net Rental Yield

Rental yield is the income return rate over the costs associated with your investment property.

It’s frequently used as a metric in property data and expressed as a percentage.

The 2 types of rental yield are Gross and Net.

Gross Rental yield is worked out with the annual rental income and the property value:

Annual Rent income= 52 x weekly rent

Property Value= Purchase or market value

Gross Rental Yield= Annual Rental Income/Property Value x 100

Ie- A property purchased for $390,000 and returns an annual rent of $26,000 would have a current rental yield of 6.67%.

Gross rental yield does not take into account the expenses associated with keeping the property.

Net Rental Yield is a more accurate prediction of rental return.

You will need to estimate all of the costs and expenses associated with your investment property such as:
•Purchasing & transaction costs
•Ongoing fees and expenses
•Vacancy costs
•Loan costs
•Building & pet inspections
•Strata reports
•Stamp duty
•Legal fees
•Mortgage repayments
•Repair & maintenance
•Strata levies
•Council rates
•Property management/advertising fees ( *slash these using RealRenta)
•Loss of rent due to vacancy periods

Once you have added up all of these costs, you can use the following formula to work out the net rental yield:

Net rental yield= Annual rental income- Annual Expenses/Total Property Cost x 100

ie: If the overall purchase price of your property is $430,000 and the weekly rent is $500 and the annual expenses are $4,500, then the current rental yield would be 5%.

Are you sick of handing over your income from your investments directly to a Property Manager?

Use RealRenta instead and get your rental income paid directly into your Bank Account.

Not yet a subscriber? Join now and get 50% off the normal subscription fees:

Jason Gwerder
Thursday, 28 May 2020

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