Rental Yield Calculator

Frequently Asked Questions

What is a good rental yield in the US?

Gross yields of 8-12% are generally considered good. Net yields of 4-8% after expenses are typical for well-managed properties. In expensive coastal markets, gross yields of 4-6% are more common.

How is rental yield different from cap rate?

Cap rate uses NOI (after all operating expenses) divided by value. Rental yield can be gross or net. Net yield and cap rate converge when calculated consistently. Cap rate is standard in commercial contexts.

Should I use the purchase price or current market value?

For investment decisions, use the purchase price to see yield on capital deployed. Once owned, current market value shows the asset's current income yield, which helps inform hold vs. sell decisions.

How does leverage affect yield?

Leverage does not change cap rate or gross/net yield, which are property-level metrics. However, when cap rate exceeds mortgage rate (positive leverage), using debt increases cash-on-cash return significantly above the yield figure.

Does the vacancy rate change seasonally?

Yes, significantly in some markets. Tourist or college-town markets may have high vacancy off-season. Annual average vacancy (typically 5-8%) smooths these swings. Model monthly cash flow separately for seasonal properties.

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Estimates for informational purposes only.

Important Disclaimer: Estimates for informational purposes only.

This calculator provides estimates for informational purposes only. Results are based on assumptions and may not reflect actual outcomes. Consult qualified professionals in relevant fields before making important decisions based on these results.

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How It Works

This calculator computes both gross and net rental yield. Gross yield = Annual Rent divided by Property Value times 100. Net yield = (Annual Rent minus Vacancy Losses minus Operating Expenses) divided by Property Value times 100. Net yield is the more meaningful figure because it reflects what you actually keep after the real costs of owning a rental property.

The calculator accepts a vacancy rate as a percentage and annual operating expenses in dollars, combining them to derive Net Operating Income (NOI) before calculating net yield. This makes it easy to see how much vacancy and expense assumptions reduce your apparent return.

Key Metrics

Typical annual expenses to include in the net yield calculation:

Property management: 8-10% of collected rent if using a professional manager.

Maintenance and repairs: Budget 1-2% of property value per year for ongoing repairs.

Insurance: Landlord policy typically 0.5-1% of property value annually.

Property taxes: 1-2% of value depending on location.

Vacancy: 5-8% of gross rent is a standard assumption for most markets.

CapEx reserves: Set aside funds for big-ticket replacements: roof, HVAC, water heater, appliances.

Tips

Net yield, not gross yield, is the figure to compare against other investment alternatives - gross yield overstates actual returns before expenses.

A gross yield above 8-10% in a US market is rare and often signals higher risk, a weaker appreciation market, or a property with deferred maintenance.

Use the 1% rule as a quick screen before calculating yield: if monthly rent is at least 1% of purchase price, the gross yield exceeds 12%, suggesting positive cash flow at typical expense levels.

For international markets, yields are typically quoted gross - adjust for local expense ratios (which can be 40-60% of gross rent in some European markets) before comparing to US net yields.

Combine this calculator with the cap-rate calculator: rental yield and cap rate are closely related, and comparing them helps validate your expense assumptions.

FAQ

What is a good rental yield in the US?

Gross yields of 8-12% are generally considered good for US rental properties (equivalent to passing the 1% rule). Net yields of 4-8% after expenses are typical for well-managed properties. In expensive coastal markets, gross yields of 4-6% are more common. What is 'good' depends on local market conditions, appreciation expectations, and your required return.

How is rental yield different from cap rate?

They are closely related but have slight definitional differences. Cap rate uses NOI (which accounts for vacancy and all operating expenses) divided by current value. Rental yield can be gross (before expenses) or net (after expenses). In practice, net yield and cap rate converge when calculated consistently. Cap rate is more standard in commercial contexts; yield is more common in residential and international contexts.

Should I use the purchase price or current market value?

For investment decisions, use the current purchase price to see your yield on the capital you will deploy. Once owned, using current market value gives you the asset's current income yield, which indicates whether it is time to sell or hold. Both have their uses; be clear which you are calculating.

How does leverage affect yield?

Leverage (taking a mortgage) does not change cap rate or gross/net yield, which are property-level metrics based on purchase price. However, leverage affects cash-on-cash return dramatically. If the cap rate exceeds your mortgage rate (positive leverage), using debt increases cash-on-cash return significantly above the yield figure.

Does the vacancy rate change seasonally?

Yes, significantly in some markets. Tourist or college-town markets may have high vacancy in winter and near-zero vacancy in peak season. Annual average vacancy (typically 5-8% for well-managed residential rentals) smooths these swings. For seasonal properties, model monthly cash flow separately rather than relying on an annual average.

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