Rental Yield Calculator
Calculate your property’s rental yield, cash flow, and return on investment.
Understanding Rental Yield
Rental yield measures the annual return on your property investment from rental income. There are two main types:
Net yield provides a more accurate picture by accounting for operating expenses like taxes, insurance, and maintenance.
Cap Rate vs Rental Yield
Cap Rate (Capitalization Rate) and Net Rental Yield are often used interchangeably, but there are subtle differences:
Cap Rate focuses on the property’s Net Operating Income (NOI) relative to its market value, used primarily by commercial investors.
Rental Yield is more commonly used in residential real estate and typically based on purchase price rather than current market value.
What’s a Good Rental Yield?
- Below 4%: Generally considered poor. May not cover expenses or provide adequate return.
- 4-6%: Fair yield. Common in high-demand urban areas with strong appreciation potential.
- 6-8%: Good yield. Solid cash flow while maintaining property quality.
- 8%+: Excellent yield. Often found in emerging markets or value-add properties.
Important Considerations
- Mortgage payments: This calculator shows NOI before debt service. If financed, deduct mortgage payments for true cash flow.
- Capital expenses: Budget for major repairs like roof replacement, HVAC, or appliances (typically 1-2% of property value annually).
- Appreciation: Yield doesn’t include property appreciation, which can significantly impact total returns.
- Market research: Compare yields in your target area. High yields may indicate higher risk or lower appreciation potential.
Frequently Asked Questions
What is the difference between gross yield, cap rate, and cash-on-cash return?
Gross yield = Annual Rent / Property Price × 100, ignoring expenses. Cap rate = NOI (Net Operating Income, rent minus operating expenses excluding mortgage) / Property Price × 100 — used to value properties independently of financing. Cash-on-cash return = Annual after-mortgage cash flow / Down Payment × 100 — measures your actual return on the cash you invested.
What rental yield range is considered a good investment?
The calculator uses this scale: below 4% is Poor, 4–6% is Fair, 6–8% is Good, and 8%+ is Excellent (gross yield). These benchmarks vary by market — high-appreciation cities like San Francisco or Manhattan often show low gross yields under 4% because appreciation makes up for income, while Midwest markets can yield 8–12%.
What operating expenses should I include in the net yield calculation?
The calculator lets you enter property tax, insurance, maintenance, HOA fees, property management fee (as a percentage of rent), and vacancy rate (as a percentage of gross rent). A common rule of thumb is that expenses consume 40–50% of gross rent, so a gross yield of 8% often translates to a net yield of 4–5%.
How does vacancy rate affect rental income?
The vacancy rate represents the percentage of the year the unit sits empty. A 5% vacancy rate on $2,000/month rent costs $1,200/year in lost income. The calculator subtracts vacancy-adjusted lost income from annual gross rent before computing net yield and cap rate, making your projections more realistic.
Should I use purchase price or current market value in the yield calculation?
For evaluating whether to buy a property, use the purchase price. For ongoing performance tracking or comparison with other properties, use current market value (sometimes called yield on value). The calculator uses the price you enter as the denominator, so enter whichever metric serves your analysis purpose.