Buying a rental property is one of the most common ways to build long-term wealth, but the listing price alone tells you almost nothing about whether the deal actually makes money. The number that matters is rental yield — the percentage return a property generates each year from rent. This calculator shows you both the gross yield (rent divided by price, before costs) and the net yield (after operating expenses), so you can compare two properties side by side like a landlord would.
You enter the purchase price, the annual rent you expect to collect, and your estimated annual expenses. The engine returns your gross yield, your net yield, how heavy your expense load is relative to rent, and roughly how many years it would take the property to pay for itself out of operating income.
How to Use
- Enter the Property Purchase Price — the total price you agree to pay the seller. If you fold closing costs or immediate repairs into your basis, include them here, because yield is always measured against your actual invested capital.
- Type your Annual Rental Income — the total rent you expect to collect over a full year. Most landlords quote rent monthly; just multiply by 12. Use a realistic, occupied-year figure, not the seller's optimistic ask.
- Add your Annual Operating Expenses — property tax, landlord insurance, property management, maintenance, expected vacancy, and HOA dues. A typical number is 20%–30% of annual rent for a hands-off landlord; if you self-manage and the property is new, it may be closer to 15%.
- Read the result card. Gross Rental Yield is the headline number brokers advertise; Net Rental Yield is the one that actually hits your bank account after bills.
- Compare the two yields. A gap of 1–2 percentage points means expenses are under control; a gap of 3 points or more usually signals high tax, insurance, or vacancy that will eat your return.
The calculator also shows Expenses as % of Rent — a quick red-flag metric — and Estimated Payback, the number of years of net operating income it would take to recoup the purchase price.
The Rental Yield Formula
Two formulas drive every result on this page.
Gross Rental Yield = (Annual Rent ÷ Property Price) × 100
Net Rental Yield = ((Annual Rent − Annual Operating Expenses) ÷ Property Price) × 100
Worked example: a $400,000 home that rents for $24,000 per year with $6,000 in annual expenses.
- Gross yield = 24,000 ÷ 400,000 × 100 = 6.0%
- Net operating income (NOI) = 24,000 − 6,000 = $18,000
- Net yield = 18,000 ÷ 400,000 × 100 = 4.5%
- Payback = 400,000 ÷ 18,000 = 22.2 years
The difference between 6.0% gross and 4.5% net is the 25% expense load. In a high-tax city like Newark or Chicago, that gap can widen to 3.5 points or more; in a low-tax suburb, it may stay under 1.5 points.
Gross vs Net: Why Both Matter
Gross yield is easy to compute and is the number real-estate portals lead with, but it flatters bad deals. A property that shows an 8% gross yield can collapse to 3% net after property tax, insurance, and a month of vacancy. Net yield is the honest return — it is the number you compare against other investments, like a 4% CD or a broad stock index returning 7% over a full cycle.
A useful rule of thumb in US markets: a net yield above 7% is strong, 5%–7% is solid, and below 4% means you are betting almost entirely on appreciation rather than cash flow. In parts of the Midwest and the South, gross yields of 8%–12% are common; in coastal California or New York City, gross yields under 3% are normal because appreciation and scarcity drive prices.
Examples
Example 1 — The benchmark deal. A duplex in Indianapolis listed at $250,000 rents for $2,200 per month, or $26,400 per year. Annual expenses run $7,000 (tax $3,200, insurance $1,200, management $2,600). Gross yield is 26,400 ÷ 250,000 = 10.6%. Net operating income is $19,400, so net yield is 7.8%. The expense load is 26.5% of rent, and payback is about 12.9 years — a healthy cash-flowing asset.
Example 2 — The glamour coastal property. A $900,000 condo in Miami Beach rents for $4,500 per month, or $54,000 per year. HOA alone is $900 per month ($10,800 per year), plus $9,000 in tax, $2,400 insurance, and $4,320 management — $26,520 in annual expenses. Gross yield is 6.0%, but net operating income is only $27,480, for a net yield of 3.1%. Buyers here are betting on appreciation, not yield.
Example 3 — The million-dollar stress test. A $1,500,000 single-family home rents for $9,000 per month, or $108,000 per year, with $30,000 in annual expenses. Gross yield is 7.2%; net operating income is $78,000; net yield is 5.2%. Even at seven figures, the engine handles the math cleanly — the ratio is what matters, not the absolute dollars.
FAQ
What is a good rental yield?
In most US markets, a net yield of 5%–8% is considered healthy for a cash-flowing rental. Above 8% is strong but usually signals a higher-risk market or older property; below 4% means you are relying on appreciation to make the deal work. Gross yield is a less reliable benchmark because it ignores expenses.
How do I calculate gross rental yield?
Divide the annual rent by the property purchase price and multiply by 100. If a $400,000 property rents for $2,000 per month ($24,000 per year), the gross yield is 24,000 ÷ 400,000 × 100 = 6.0%. Use the property price you actually paid, not the assessed value.
What is the difference between gross and net rental yield?
Gross yield uses rent only. Net yield subtracts annual operating expenses — property tax, insurance, management, maintenance, vacancy, and HOA — from rent, then divides by the property price. The gap between the two is your expense load; a gap of more than 3 percentage points usually warrants a closer look at the numbers.
Should I include the mortgage in my yield calculation?
No. Rental yield (gross or net) is computed on the property price, not the loan. Mortgage interest is a financing choice, not an operating expense. The return you earn after debt service is called cash-on-cash return, which factors in your down payment and monthly mortgage payment — a different metric that answers a different question.
What counts as an operating expense?
Include recurring costs tied to running the property: property tax, landlord insurance, property management fees (typically 8%–12% of rent), routine maintenance, landscaping, expected vacancy (one month per year is a common estimate), HOA dues, and advertising. Do not include your mortgage principal, mortgage interest, capital improvements, or income tax — those are not operating expenses.
Is rental yield the same as cap rate?
They look similar but are not identical. Cap rate divides NOI by the property's current market value and is used by appraisers and commercial investors to compare buildings in a submarket. Rental yield is the more consumer-facing term, often quoted on the purchase price and sometimes quoted gross. This calculator reports both gross and net yield; the net yield here is numerically the same as an unlevered cap rate on the purchase price.
What happens if my net operating income is negative?
If annual expenses exceed annual rent, net operating income is negative and net yield is negative — the property is cash-flowing at a loss every year. The payback figure is not meaningful in that case, and you should expect appreciation or tax benefits (like depreciation) to carry the investment until rents rise.
Disclaimer
This rental yield calculator is provided for informational purposes only and does not constitute financial, real-estate, tax, or legal advice. Estimates are based on the inputs you enter; actual expenses, vacancy, and appreciation vary by market, property condition, tenant quality, and local tax policy. This tool does not model mortgage interest, closing costs, depreciation, or income tax. Always run your own numbers and consult a licensed real-estate professional or tax advisor before purchasing an investment property.