What is rental yield?

Rental yield is a key real estate metric that measures the return on investment (ROI) a property generates through rental income. It is usually expressed as a percentage of the property’s value or purchase price, helping investors evaluate how profitable a rental property is. A higher rental yield indicates better income-generating potential.

How Rental Yield Works

Rental yield shows how much income a property earns relative to its cost.

Basic Formula

Rental Yield = Annual Rental Income / Property Value × 100

• Annual Rental Income: Total rent earned in a year
• Property Value: Purchase price or current market value

Types of Rental Yield

Gross Rental Yield

• Calculated before deducting expenses
• Simple way to compare properties

Net Rental Yield

• Calculated after deducting costs such as:
• Maintenance
• Property tax
• Insurance
• Vacancy losses

Net yield gives a more realistic picture of actual returns.

Rental yield is an essential metric for evaluating the income potential of a real estate investment. By understanding how it works and what affects it, investors can make smarter decisions and build a steady income stream from property.