Rental Yield Calculator
Enter the property's purchase price, monthly rent, and annual costs. Get a calculation of yield percentages and cash flow.
Gross rental yield
Net rental yield
Annual net income
Monthly cash flow
Rental Yield Calculator – Analyze Investment Property Profitability
The rental yield calculator helps real estate investors assess the profitability of a rental property by computing gross and net rental yield, monthly cash flow, and estimated payback period. Understanding yield is essential for comparing properties and making informed investment decisions.
Gross Rental Yield vs. Net Rental Yield
Gross rental yield is the simplest measure — it ignores expenses:
Gross Rental Yield = (Annual Rent ÷ Property Price) × 100%
Net rental yield gives a more accurate picture by subtracting annual operating costs:
Net Rental Yield = ((Annual Rent − Annual Expenses) ÷ Property Price) × 100%
Worked Example
You purchase a rental property for $250,000. Monthly rent is $1,800 and annual expenses total $6,200.
- Annual rent: $1,800 × 12 = $21,600
- Gross yield: $21,600 ÷ $250,000 × 100 = 8.64%
- Net annual income: $21,600 − $6,200 = $15,400
- Net yield: $15,400 ÷ $250,000 × 100 = 6.16%
- Monthly cash flow: $15,400 ÷ 12 = $1,283
What Is a Good Rental Yield?
| Net Rental Yield | Assessment | Typical Markets |
|---|---|---|
| Below 3% | Poor — profitability questionable | Premium coastal cities (SF, NYC, LA) |
| 3% – 5% | Fair — typical in high-demand urban areas | Denver, Seattle, Austin, Boston |
| 5% – 7% | Good — strong cash flow territory | Indianapolis, Memphis, Cleveland |
| 7% – 10% | Excellent — high-cash-flow markets | Rust Belt cities, small college towns |
| Above 10% | Exceptional — verify for hidden risks | Distressed properties, D-class neighborhoods |
Higher yields often come with higher risk — tenant turnover, vacancy, and property depreciation can erode returns in less desirable locations.
Cap Rate vs. Rental Yield
Cap rate (capitalization rate) and rental yield are closely related but not identical:
| Metric | Formula | Use |
|---|---|---|
| Gross rental yield | Annual rent ÷ purchase price | Quick comparison shopping |
| Net rental yield | (Annual rent − expenses) ÷ purchase price | Realistic return estimate |
| Cap rate | NOI ÷ current market value | Appraising value at current prices |
| Cash-on-cash return | Annual cash flow ÷ total cash invested | Measures return on your actual down payment |
Typical Annual Expenses for Rental Properties
| Expense | Typical Range | Notes |
|---|---|---|
| Property taxes | 0.5% – 2.5% of value | Varies widely by state (NJ ~2.5%, HI ~0.3%) |
| Landlord insurance | $800 – $2,500/year | Higher for flood/earthquake zones |
| Maintenance & repairs | 1% – 2% of value/year | Budget 1% for newer, 2% for older properties |
| Property management | 8% – 12% of rent | Skip if self-managing |
| HOA fees (condos) | $200 – $600/month | May include some utilities and insurance |
| Vacancy | 5% – 10% of annual rent | Equivalent to 0.5 – 1.2 vacant months/year |
| Capital expenditures | 5% – 10% of rent | Reserve for roof, HVAC, appliance replacement |
The 1% Rule and the 50% Rule
Real estate investors often use two quick screening rules:
- The 1% Rule — Monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month to be worth investigating
- The 50% Rule — Expect approximately 50% of gross rent to go toward operating expenses (excluding mortgage payments). If you collect $2,000/month, budget ~$1,000 for expenses and $1,000 for debt service + profit
These rules are rough filters, not guarantees — always run full numbers.
Tax Considerations for Rental Income
Rental income is taxed as ordinary income in the United States, but landlords can deduct many expenses:
- Mortgage interest
- Property taxes
- Insurance premiums
- Repairs and maintenance
- Property management fees
- Depreciation (residential properties depreciated over 27.5 years)
- Travel expenses for property management
Depreciation is especially valuable — it is a non-cash deduction that can offset rental income and reduce your tax bill significantly.
Frequently Asked Questions
What is rental yield?
Rental yield is the annual rental income expressed as a percentage of the property's purchase price or current market value. It measures how effectively a property generates income relative to its cost. Net yield subtracts annual expenses for a more accurate picture.
What is a good rental yield?
A net rental yield of 5-7% is generally considered good in most U.S. markets. Premium urban areas may yield only 3-4%, while smaller cities and Midwest markets often exceed 7-8%. Always factor in risk alongside yield.
What is the difference between gross and net rental yield?
Gross yield = annual rent ÷ property price × 100. Net yield subtracts annual expenses (property taxes, insurance, maintenance, management fees, vacancy) from rental income before dividing by property price. Net yield is always lower and more realistic.
How do I calculate my rental property's return on investment?
Cash-on-cash ROI = (Annual cash flow after all expenses and mortgage) ÷ Total cash invested × 100. Total cash invested includes down payment, closing costs, and any renovation expenses.
What expenses reduce rental yield?
Key expenses include property taxes (0.5-2.5% of value), landlord insurance ($800-$2,500/year), maintenance (1-2% of value), property management (8-12% of rent), vacancy loss (5-10% of rent), and capital expenditure reserves.
Related Tools
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- Investment Return Calculator — Calculate ROI on any investment
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- Home Affordability Calculator — Find how much house you can afford