Rental Yield Calculator: Gross & Net Yield Explained
Quick Answer
Rental yield measures how much income a property generates relative to its value. Gross yield = (annual rent ÷ property value) × 100.A yield of 5–8% is generally considered strong in most U.S. markets. Net yield subtracts operating expenses and is typically 2–4 percentage points lower than gross yield.
Gross Rental Yield vs. Net Rental Yield
There are two standard ways to measure rental yield, and confusing them is the most common mistake new real estate investors make:
| Metric | Formula | Best For |
|---|---|---|
| Gross Yield | (Annual Rent ÷ Property Value) × 100 | Quick comparison between markets |
| Net Yield | ((Annual Rent − Expenses) ÷ Property Value) × 100 | Actual return on investment |
According to the National Association of Realtors (NAR, 2025), the median gross rental yield across U.S. single-family rentals was approximately 6.8%, but after accounting for all expenses, net yields averaged 4.1%—a gap of 2.7 percentage points.
How to Calculate Gross Rental Yield: Step-by-Step
- Determine the property's purchase price (or current market value for on-going investments)
- Calculate annual rental income: monthly rent × 12 (adjust downward for vacancy)
- Divide annual rent by property value and multiply by 100
Example: A $350,000 property renting for $2,100/month:
- Annual rent = $2,100 × 12 = $25,200
- Gross yield = ($25,200 ÷ $350,000) × 100 = 7.2%
Calculating Net Rental Yield
Net yield requires subtracting all annual operating expenses from rental income before dividing. Key expense categories:
| Expense | Typical Range | Annual Estimate (on $25,200 rent) |
|---|---|---|
| Property Management | 8–12% of rent | $2,016–$3,024 |
| Property Taxes | 0.5–2.5% of value | $1,750–$8,750 |
| Insurance | 0.5–1% of value | $1,750–$3,500 |
| Maintenance & Repairs | 1% of value (rule of thumb) | $3,500 |
| Vacancy Loss | 5–10% of potential rent | $1,260–$2,520 |
Continuing the example: assume total expenses of $9,000/year on the $350,000 property.
- Net income = $25,200 − $9,000 = $16,200
- Net yield = ($16,200 ÷ $350,000) × 100 = 4.6%
Rental Yield Benchmarks by U.S. Market (2025)
Yields vary dramatically by city based on home prices versus rental rates. According to ATTOM Data Solutions (2025), the average gross rental yield for single-family rentals in major U.S. markets breaks down as follows:
| Market | Avg. Gross Yield | Avg. Home Price |
|---|---|---|
| Cleveland, OH | 12.1% | $145,000 |
| Detroit, MI | 10.8% | $158,000 |
| Memphis, TN | 9.4% | $185,000 |
| Atlanta, GA | 6.9% | $375,000 |
| Austin, TX | 5.1% | $520,000 |
| San Francisco, CA | 3.2% | $1,200,000 |
Cap Rate vs. Rental Yield: What Is the Difference?
These terms are often used interchangeably but have a technical distinction:
- Cap rate (capitalization rate) = Net Operating Income (NOI) ÷ property value. NOI is gross rent minus operating expenses, but before mortgage payments. Used heavily in commercial real estate and multi-family analysis.
- Net rental yield = net income ÷ property value. Often calculated the same way as cap rate but can sometimes include mortgage interest in expenses (which cap rate never does).
For a residential buy-and-hold investor comparing properties, net yield is more intuitive. For commercial real estate and larger multi-family buildings, cap rate is the industry standard. According to CBRE (2025), average cap rates for U.S. multifamily properties ranged from 4.5% to 6.0% in major metropolitan markets.
The 1% Rule: A Quick Screening Test
Many real estate investors use the “1% rule” as a quick filter: monthly rent should equal at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month. If it does, the gross yield is approximately 12%, and the property may cash flow positively even after expenses.
The 1% rule is a screening heuristic, not a guarantee. In most major U.S. cities, meeting the 1% rule is difficult or impossible due to high home prices relative to rents. It's best used in affordable markets where the math supports it.
Frequently Asked Questions
What is a good rental yield?
A gross rental yield of 5–8% is generally considered good in most markets. In high-demand cities like San Francisco or London, 3–4% gross yield is typical due to high prices. In smaller markets, 8–12% is achievable. Net yield (after expenses) is usually 2–4 percentage points lower than gross.
What is the difference between gross and net rental yield?
Gross yield = (annual rent ÷ property value) × 100, before any expenses. Net yield subtracts all operating expenses (management, maintenance, insurance, vacancy, taxes) before dividing. A property with 8% gross yield might deliver only 5% net yield after expenses.
What is cap rate vs rental yield?
Cap rate = Net Operating Income ÷ property value, ignoring financing. Net rental yield is calculated the same way but may include mortgage interest in some definitions. For residential buy-and-hold properties, net yield is more common. For commercial properties, cap rate is the industry standard metric.
How do I calculate rental yield?
Gross yield: (annual rent ÷ property value) × 100. Net yield: ((annual rent − annual expenses) ÷ property value) × 100. Example: $18,000 annual rent on a $300,000 property = 6% gross yield. Subtract $7,000 in expenses = 3.67% net yield.
What expenses reduce rental yield?
Property management (8–12% of rent), property taxes (0.5–2.5% of value annually), insurance (0.5–1% of value), maintenance (1% of value rule of thumb), and vacancy loss (5–10% of potential rent). Together these typically reduce gross yield by 2–4 percentage points.