How to Calculate Rental Yield (Gross vs Net)

What Is Rental Yield?

Rental yield is the most straightforward way to measure how much income an investment property generates relative to what it costs. Knowing how to calculate rental yield gives you a fast, reliable metric for comparing deals across different price points and markets — whether you are screening your first investment or analyzing your tenth.

The concept is simple: divide the annual rental income by the property price and express the result as a percentage. A property priced at $300,000 that rents for $2,000 per month produces $24,000 in annual rent. Divide $24,000 by $300,000, and you get a gross rental yield of 8.0%.

There are two versions of this calculation, and understanding the difference between them is critical to making informed investment decisions. Gross rental yield uses total rent with no deductions. Net rental yield subtracts operating expenses first, giving you a more realistic picture of income after ownership costs. Both have their place in property analysis, and the rental yield calculator computes both instantly from your property details.

Gross Rental Yield Formula

Gross rental yield is the simpler of the two calculations. It requires just two numbers: annual rent and property price.

Gross Rental Yield = (Annual Rent / Property Price) x 100

Here is a worked example using realistic investment property numbers:

• Property price: $350,000
• Monthly rent: $2,400
• Annual rent: $2,400 x 12 = $28,800

Gross Yield = ($28,800 / $350,000) x 100 = 8.2%

Gross yield is a screening metric. It tells you at a glance whether a property’s rent-to-price ratio is in the right ballpark. You can calculate it from a listing in seconds, making it useful for quickly filtering properties before deeper analysis.

The limitation is obvious: gross yield ignores every expense associated with owning the property. It assumes you collect every dollar of rent with zero costs, which never happens in practice. That is where net rental yield fills the gap.

Net Rental Yield Formula

Net rental yield accounts for the operating expenses that come with property ownership. It answers a more useful question: how much income do you actually keep after paying the costs of maintaining and managing the property?

Net Rental Yield = ((Annual Rent - Operating Expenses) / Property Price) x 100

Using the same $350,000 property from above, here are typical operating expenses:

• Property taxes (1% of value): $3,500
• Insurance: $1,500
• Maintenance (1.5% of value): $5,250
• Property management (8% of rent): $2,304
• Vacancy allowance (5% of rent): $1,440

Total operating expenses: $14,994

Net Yield = (($28,800 - $14,994) / $350,000) x 100 = 3.9%

The gap between the 8.2% gross yield and the 3.9% net yield reveals the property’s expense burden. In this example, operating costs consume nearly half of the rental income. That gap varies significantly by property type, location, and management approach. The rental yield calculator offers both quick mode for a fast estimate and detailed mode for itemized expense tracking.

Gross vs Net Rental Yield: Side-by-Side Comparison

Understanding when to use each version saves you time during different stages of property analysis.

	Gross Rental Yield	Net Rental Yield
Formula	Annual Rent / Property Price	(Annual Rent - Expenses) / Property Price
Inputs needed	2 (rent, price)	5+ (rent, price, taxes, insurance, maintenance, etc.)
Best for	Initial screening, quick comparison	Detailed analysis, deal evaluation
Accuracy	Optimistic — ignores all costs	Realistic — reflects actual income
Speed	Seconds per property	Minutes per property
When to use	Browsing listings, filtering markets	Evaluating specific deals, comparing finalists

Start with gross yield to narrow your search. A property with a low gross yield rarely improves when you add expenses. If the gross yield looks promising, switch to net yield for a realistic assessment before making an offer.

What Is a Good Rental Yield by US Market?

Rental yield benchmarks vary significantly across the United States because property prices and rents do not move in lockstep. Markets with lower property prices relative to rents produce higher yields, while expensive markets compress yields even when rents are high in absolute terms.

Here are typical gross yield ranges across US markets:

Market Type	Gross Yield Range	Characteristics
Midwest markets	8% – 12%	Lower prices, strong cash flow
National average	6% – 8%	Balanced income and growth
Coastal suburban	4% – 6%	Higher prices, appreciation-focused
Gateway cities	Below 4%	Price-driven, minimal cash flow yield

The US national average gross rental yield sits at approximately 6.5%. Properties yielding above this benchmark generate above-average income relative to their price.

A high yield does not automatically mean a better investment. Midwest markets with 10% gross yields may have slower appreciation, higher tenant turnover, or greater management challenges. Coastal markets yielding 4% often compensate with stronger price appreciation and more stable tenant demand. Your investment strategy — cash flow versus appreciation versus a blend of both — determines which yield range fits your goals.

Keep in mind that these are gross yield ranges. Net yields run lower after expenses. A property with an 8% gross yield and heavy expenses may net less than a property with a 7% gross yield and minimal costs. Always run both calculations.

Calculating Rental Yield Step by Step

Follow these steps to calculate rental yield for any property. You can do this with a calculator, a spreadsheet, or the rental yield calculator for instant results.

Step 1: Determine the annual rent. Multiply the monthly rent by 12. Use current market rent for an accurate assessment — check comparable listings in the area or ask a local property manager. If the property is vacant, do not rely on the landlord’s asking rent. Verify it against the market.

Step 2: Identify the property price. For a potential purchase, use the asking price or your anticipated offer price. For a property you already own, you can use either the original purchase price or the current market value, depending on whether you want to measure yield on your original investment or assess current performance. For new acquisitions that need work, include rehab costs in the price — a $250,000 property needing $30,000 in repairs has an effective cost basis of $280,000.

Step 3: Calculate gross yield. Divide annual rent by property price, then multiply by 100. If it falls below 5% in most markets, the property is unlikely to generate meaningful cash flow.

Step 4: Estimate operating expenses for net yield. Gather or estimate these annual costs:

• Property taxes — check the county assessor’s website or the listing
• Insurance premiums — get a quote or use the annual estimate from the listing
• Maintenance and repairs — typically 1% to 2% of property value per year
• Property management fees — 8% to 10% of collected rent if using a manager
• Vacancy allowance — 5% is a standard starting assumption

Step 5: Calculate net yield. Subtract total operating expenses from annual rent, divide by the property price, and multiply by 100.

Step 6: Compare to benchmarks. Use the market ranges above to contextualize your result. A property yielding 7% gross in a coastal market is strong, while the same yield in a Midwest market is average. Always compare like to like — gross to gross for screening, net to net for detailed analysis.

Rental Yield vs Cap Rate

Rental yield and cap rate are closely related metrics that often confuse investors. Both divide an income figure by the property price, but they differ in what income they use.

Gross rental yield uses total annual rental income before any deductions. It is the fastest screening metric, requiring just rent and price.

Cap rate uses net operating income (NOI) — rental income after vacancy and operating expenses. It provides a more thorough view of the property’s earning power.

For a property you recently purchased, net rental yield and cap rate produce the same number because the denominator is the same: the purchase price. Over time, as the property appreciates, the two metrics may diverge. Investors sometimes recalculate yield against the original purchase price while updating cap rate to reflect current market value.

Both metrics exclude financing. Neither accounts for mortgage payments, down payment, or loan terms. If you want a return metric that reflects your actual financing, cash-on-cash return is the right tool. You can explore how cap rate and cash-on-cash return compare in our guide on cash-on-cash return vs cap rate.

The cap rate calculator computes net operating income and cap rate from the same property details, giving you a complementary view alongside rental yield.