Rental yield expresses annual rent as a percentage of property value — gross yield uses rent alone, net yield subtracts expenses. The quick income-return check for buy-to-let.
The example
$24k rent on a $400k property.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Annual rent | 24000 |
| 3 | Value | 400000 → 6.0% |
The formula
The formula:
How it works
How it works:
- Gross yield = annual rent ÷ property value — a fast, expense-free screen.
- Net yield subtracts operating costs first:
(rent - expenses) / value. - Use purchase price + costs in the denominator for a true acquisition yield.
- Net yield on price is essentially the cap rate — the terms overlap.
Gross vs net can differ a lot. A 6% gross yield can drop to 4% net once taxes, insurance, management and maintenance come out. Always check the net figure before comparing to alternative investments — gross yield flatters every property equally.
Try it: interactive demo
Rent, value, and annual expenses.
Variations
Net yield
After expenses:
On total cost
Include buying costs:
Monthly rent input
Annualize first:
Pitfalls & errors
Gross flatters. Always check net yield before deciding — expenses vary widely.
Value vs cost. Yield on purchase price plus costs is more honest than on value alone.
Net yield ≈ cap rate. They measure nearly the same thing — don’t double-count.
Practice workbook
Frequently asked questions
How do I calculate rental yield in Excel?
What's the difference between gross and net yield?
Is net yield the same as cap rate?
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