Rental yield is the rent a property earns over a year, shown as a percentage of what the property cost. It comes in two versions: gross, which uses rent alone, and net, which subtracts a year of holding costs first. Both are worked out the same way each time, once you know which numbers to use.
Gross rental yield
Gross yield divides a year of rent by the purchase price.
Gross yield = annual rent ÷ purchase price × 100
Rent is usually advertised or paid weekly, so convert it to an annual figure first by multiplying by 52.
Example: a $650,000 unit renting for $600 a week.
- Annual rent: $600 × 52 = $31,200
- Gross yield: $31,200 ÷ $650,000 × 100 = 4.8%
That is the full calculation for gross yield. It is a fast way to compare properties, but it takes no account of what the property costs to hold, which is what net yield is for.
Net rental yield
Net yield subtracts a year of holding costs from the rent before dividing by price, so it shows what is left after running costs, before any loan repayments.
Net yield = (annual rent − annual costs) ÷ purchase price × 100
Which costs you include matters as much as the formula. A net yield calculation for a rental property typically lists:
- property management fees
- council and water rates
- building or landlord insurance
- strata or body corporate fees, for a unit or townhouse
- a repairs and maintenance allowance
- land tax, if it applies to the property
Example: the same $650,000 unit renting for $600 a week ($31,200 a year), with annual costs of $2,500 in management fees, $2,800 in council and water rates, $900 in insurance, $3,200 in strata fees and $1,500 in maintenance, for $10,900 in total.
- Net rent: $31,200 − $10,900 = $20,300
- Net yield: $20,300 ÷ $650,000 × 100 = 3.1%
The gap between the two figures here, 4.8% down to 3.1%, is the cost of actually running the property. Two properties with the same gross yield can have quite different net yields once strata fees or land tax are counted. For a fuller list of the costs to expect when owning an investment property, see Moneysmart's guide to buying an investment property.
Common mistakes that skew the number
A yield figure that looks wrong was usually calculated correctly on the wrong inputs. Check for these before comparing properties:
- Mixing weekly and annual rent. A weekly figure dropped straight into the formula without converting it to an annual figure first produces a yield that is far too low.
- Using the asking price instead of the purchase price. A yield calculated on what a property is listed for, rather than what you actually pay, is only ever an estimate.
- Leaving out vacancy. A yield based on 52 weeks of rent assumes the property is tenanted every week of the year.
- Leaving out strata or body corporate fees. These usually apply to units and townhouses, and to some houses in a strata or community scheme, and skipping them makes a net yield look better than it is.
- Comparing a house with a unit, or a weekly figure with a monthly one, as though they measure the same thing. Yield only compares fairly when the property type, the cost basis and the time period match on both sides.
What yield tells you and what it leaves out
Yield is a snapshot: rent against price, at a point in time. It does not tell you whether rent will rise or fall, whether the building needs work, whether the property suits your own plans, or where the price might go. Two properties with an identical yield can have very different outlooks for all of those reasons.
Yield is also not the same as cash flow. Once a loan is involved, cash flow is what is left after loan repayments as well as running costs, not just the running costs net yield accounts for. A property with a healthy net yield can still cost you money every week if the loan repayments are large enough, and a property with a modest yield can be comfortable to hold if the loan is small relative to the price. Working out that figure for a specific loan and rate is a separate calculation from yield; the cash flow calculator walks through it.
Finding a rent figure you can rely on
Any yield calculation is only as good as the rent figure behind it. A single national or state average will not help much here: yields vary by suburb, property type and price bracket, and a published average is out of date as soon as new listings and leases land. For a figure you can use on one property, try:
- a written rental appraisal from a local property manager or real estate agent
- comparable properties of a similar type and condition, currently advertised for rent nearby
- a property manager who leases similar properties in the area, who can tell you what they are actually achieving in rent rather than what is asked
Note the date on whatever figure you use, and treat it as an estimate until a lease is signed.
Doing this in Virtual Buyers Agent
Each property tracked in Virtual Buyers Agent has a Finances area where you record the price, the rent and the running costs, along with your own assumptions. The yield and cash flow are worked out from those figures, with the formula shown next to the result. To check a property before you add it, the public rental yield calculator runs the same calculation with no sign-in needed.
Reviewed 28 September 2026.