Q. How to Calculate Rental Yield?
There are two forms of rental yield: gross rental yield and net rental yield. Gross rental yield is a simpler metric that doesn’t take the property’s expenses into account, while net rental yield does. Net rental yield is usually a better metric to look at because expenses don’t always scale linearly with income, meaning that as you earn one dollar in income, the expenses associated with that income are not always the same for different properties.
Q. What is Gross Rental Yield?
Gross rental yield is simply the annual rental income of the property divided by the value of the property. [ Gross Rental Yield = Annual Rent / Property Value ].
Q. What is Net Rental Yield?
Net rental yield subtracts expenses (vacancy, maintenance, taxes, insurance, etc.) from the annual rent before dividing by the property value. This gives a truer picture of profitability.
Q. Formula for Net Rental Yield?
Net Rental Yield = ((Annual Rent × (1 - Vacancy Rate)) - Expenses) ÷ Property Value × 100
