Rental Yield Calculator

Rental yield is the most important metric for evaluating an investment property at a glance. Gross yield is annual rent divided by property price — a quick measure that doesn't account for costs. Net yield subtracts expenses (maintenance, insurance, taxes, vacancy, management fees) to show your true return on the property's value.

As a rough benchmark, a gross yield above 8% is strong in most US markets, 5–7% is typical, and below 4% indicates a low-yield market relying on appreciation. Net yields are usually 2–3 percentage points lower than gross. Always compare against alternatives like index funds, which historically return ~7% annually with no maintenance.

Payback period (price ÷ annual profit) is the time to recover your investment from cash flow alone, ignoring appreciation. A short payback means strong cash flow; long paybacks rely on selling at a higher price to be profitable.

Don't forget mortgage costs if you finance the property — true cash-on-cash returns can be much higher (or much worse) than yields suggest. Combine this calculator with a mortgage calculator for a complete picture.

Gross rental yield (annual rent ÷ purchase price) is the headline metric, but net yield is what actually lands in your pocket. Subtract property taxes, insurance, maintenance reserves (typically 1% of property value per year), property management fees (8–10% of rent if you use a manager), HOA dues, vacancy allowance (usually 5–8%) and capital expenditure reserves for big-ticket items like roofs and HVAC. The net yield is almost always 2–4 percentage points lower than the gross.

The 1% rule and the 50% rule are popular shortcuts among real-estate investors. The 1% rule says monthly rent should be at least 1% of the purchase price (a $200,000 property should rent for $2,000+). The 50% rule says operating expenses excluding mortgage will average about 50% of rental income. Both are crude generalisations, but they are useful for quickly screening listings before doing the full math in this calculator.

Cash-on-cash return is a complementary metric that measures annual pre-tax cash flow as a percentage of cash invested (down payment plus closing costs plus initial repairs). Because rental properties are often financed, cash-on-cash returns can be much higher than yield — leverage amplifies both gains and losses. A 6% cap rate property bought with 25% down can produce a 15% cash-on-cash return in a normal market, but can also produce negative cash flow if vacancy or interest rates spike.

Appreciation, principal paydown and tax benefits are the three components of total return that yield alone does not capture. Historically, US residential real estate appreciates at about 3–4% per year. Each mortgage payment builds equity at an accelerating pace. Depreciation deductions (over 27.5 years for residential) and the 1031 exchange let investors defer capital gains taxes when selling. Run yield as your floor — if a property doesn't cash flow, the other three components have to do all the heavy lifting.