Rental Yield Calculator

Gross rental yield is the simplest version: annual rent divided by the purchase price, expressed as a percentage. If a $300,000 condo rents for $2,000/month ($24,000/year), the gross yield is 8.0%. It's the back-of-the-napkin metric brokers and investors use to screen markets at a glance.

Net rental yield deducts vacancy losses and operating expenses (taxes, insurance, repairs, management, utilities you cover) before dividing by price. Net yield is conceptually identical to capitalization rate (cap rate) — it's the unlevered return on the asset before any mortgage. Most disciplined investors plan against net yield because gross yield routinely overstates the true return by 30–50%.

The formula this calculator uses: Effective Rent = Annual Rent × (1 − Vacancy %), then Net Annual = Effective Rent − Operating Expenses, then Net Yield = Net Annual ÷ Purchase Price. Vacancy default of 5% reflects a healthy long-term rental in a stable market; short-term rentals and tertiary markets often run 10–15%.

A single-family rental priced at $350,000 rents for $2,500/month. Gross annual rent is $30,000, so gross yield = 30,000 ÷ 350,000 = 8.57%. That looks great — but assume 5% vacancy and $6,000/year of operating expenses (taxes, insurance, basic repairs, half-month-of-rent annual turnover cost).

Effective rent = 30,000 × 0.95 = $28,500. Net annual income = 28,500 − 6,000 = $22,500. Net yield = 22,500 ÷ 350,000 = 6.43%. The real number is two full points lower than the headline gross yield — a gap that decides whether the deal cash-flows after a mortgage.

Layering in 25% down and a 7% loan would produce roughly $20,900/year of debt service, leaving $1,600 of pre-tax cash flow on $87,500 of equity invested — about a 1.8% cash-on-cash. That's exactly why net yield underwriting matters: gross yield made this look like a winner; net yield + leverage exposes the truth.

Coastal primary markets (NYC, Bay Area, LA, Vancouver, London): 3–5% gross / 2–3.5% net. Investors here lean on appreciation, not cash flow.

Sunbelt and growth markets (Austin, Phoenix, Nashville, Tampa): 5–7% gross / 3.5–5% net. A balance of cash flow and appreciation, though heated 2021–2023 pricing compressed yields significantly.

Midwest and southern cash-flow markets (Cleveland, Memphis, Birmingham, Indianapolis): 9–14% gross / 6–9% net. Strong current cash flow, slower appreciation, more management complexity.

Tertiary and rural markets: 12–20%+ gross is achievable but with thinner buyer pools, longer vacancies, and harder financing.

Short-term and mid-term rentals: gross yields can hit 15–25% in vacation markets, but net yields after cleaning, dynamic pricing software, platform fees, and 25–35% effective vacancy often land near 6–10%.

1% rule: monthly rent ≥ 1% of purchase price (implies 12% gross yield). Once common, now rare in most US metros — useful as a screen, not a hard cutoff.

2% rule: a more aggressive cash-flow target (24% gross yield) found mainly in distressed urban Midwest properties; comes with management headaches and capex risk.

50% rule: assume operating expenses (excluding mortgage) eat about 50% of gross rent. A quick way to estimate net yield without itemizing expenses.

Gross Rent Multiplier (GRM): purchase price ÷ annual rent. Inverse of gross yield. A GRM of 10 ≈ 10% gross yield. Useful when comparing deals with different price points.

Use these as sanity checks, not underwriting substitutes — actual taxes, insurance, and capex vary 10× between markets and asset types.