How to Calculate Rental Yield

Rental yield measures how much income your property generates relative to its value. It's the quickest way to compare investment properties and understand your cash flow position.

Gross rental yield

The simple version — annual rent divided by property value.

Formula: Gross Yield = (Annual Rent ÷ Property Value) × 100

Example: A $500,000 property renting for $500/week. Annual rent = $500 × 52 = $26,000 Gross yield = $26,000 ÷ $500,000 × 100 = 5.2%

Net rental yield

The realistic version — factors in expenses like council rates, insurance, management fees, maintenance, and strata.

Formula: Net Yield = ((Annual Rent – Annual Expenses) ÷ Property Value) × 100

Example: Same property with $8,000 in annual expenses. Net yield = ($26,000 – $8,000) ÷ $500,000 × 100 = 3.6%

What's a good yield?

For Australian investment properties in 2026:

• Under 3% gross — Low yield, relying heavily on capital growth (common in Sydney, Melbourne)
• 4-5% gross — Balanced, typical of metro fringe suburbs
• 6%+ gross — High yield, often regional areas (may trade off capital growth)

Yield vs growth

High-yield properties generate cash flow. High-growth properties build equity. The best portfolio has a mix of both — some properties paying the bills, others building wealth.

The takeaway

Always calculate net yield, not gross. Gross yield looks good on paper but doesn't account for the real costs of ownership. Track your actual expenses to know your true return.