Rental yield is a measure of how much income a property generates relative to its value. It is expressed as a percentage and gives you a quick way to compare the income-producing potential of different properties. A higher yield means the property earns more income relative to its price.
There are two types of rental yield, gross yield and net yield, and the distinction matters when you are comparing investments.
How to Calculate Rental Yield
The basic formula is:
Rental yield = (annual rental income / property value) x 100
If a property is worth $600,000 and earns $30,000 per year in rent ($577 per week), the gross rental yield is 5.0%.
This calculation uses the property's current market value, not necessarily what you paid for it. As property values change over time, the yield shifts even if the rent stays the same.
Gross vs Net Yield
Gross yield uses the total rental income before any expenses. Net yield subtracts the costs of owning the property (management fees, insurance, rates, maintenance, and other outgoings) to give you a more realistic picture of the actual return.
Net yield is always lower than gross yield because it accounts for the real costs of ownership. It is the more useful number for making investment decisions, even though gross yield is what you see quoted most often in property listings and market reports.
What Is a Good Yield?
Yields vary significantly by location and property type. In major capital cities, gross yields of 3% to 5% are common. Regional areas often produce higher yields of 5% to 8% or more, but may come with lower capital growth prospects.
There is no single "good" yield; it depends on your investment strategy. Some investors prioritise yield for cash flow, while others accept a lower yield in exchange for stronger capital growth.
Why It Matters for Landlords
Rental yield is one of the key metrics for evaluating an investment property. It helps you compare properties, assess whether a rent increase is warranted, and understand your property's performance over time. For guidance on pricing your rental, see our guide to setting the right rent price.
propkt calculates your actual yield based on real income and expense data, so you can see exactly how your property is performing. For a quick comparison, try our rental yield calculator.