Rental Yield Calculator

How to use the rental yield calculator

Enter:

• Price: purchase price, or current value if you already own it. Add closing costs and initial repairs if you want the yield on your full cost.
• Rent: the monthly rent at full occupancy.
• Costs: yearly operating costs. That means property tax, insurance, repairs, management, utilities you pay, HOA dues, and an allowance for vacancy.

The calculator returns gross and net yield.

The rental yield formulas

• Annual rent = monthly rent x 12
• Gross yield = annual rent / price x 100
• Net yield = (annual rent - annual operating costs) / price x 100

A worked rental yield example

A three-bedroom house costs $220,000 and rents for $1,700 a month.

• Annual rent: $1,700 x 12 = $20,400
• Gross yield: $20,400 / $220,000 = 9.27%

Yearly costs:

Cost	Annual
Property tax	$2,600
Insurance	$1,500
Repairs and maintenance	$1,700
Vacancy allowance (about 3 weeks)	$1,000
Total	$6,800

• Net yield: ($20,400 - $6,800) / $220,000 = $13,600 / $220,000 = 6.18%

The gap between 9.27% and 6.18% is the cost of owning the property. Listings and sales pitches usually quote the gross figure.

What a good yield looks like for a small landlord

Compare net yield with your mortgage rate. If you’d borrow at 7% and the net yield is 6.18%, each borrowed dollar earns less than it costs, and your cash flow will be thin or negative unless you put more down. If the net yield is above your borrowing rate, borrowing helps instead of hurting.

You’ll also hear the 1% rule: monthly rent should be at least 1% of the price. Here it’s $1,700 / $220,000 = 0.77%. It’s a rough screen that ignores taxes and insurance, which vary a lot between states and even counties. Net yield is a better filter.

A higher yield isn’t automatically better. Properties in areas with high yields sometimes carry higher vacancy, more repairs or slower appreciation. Look at the whole picture before you choose on yield alone.

Yield on what you paid vs what it’s worth now

If you’ve owned a rental for years, work out both. Say you bought the house above for $150,000 a decade ago and it’s worth $220,000 today. Your net yield on cost is $13,600 / $150,000 = 9.07%. Your net yield on today’s value is 6.18%. The second number is the one to compare with selling and putting the money elsewhere, because $220,000 is what the house is really tying up.

Limits and caveats

• No financing. Yield doesn’t show what the mortgage does to your cash flow.
• No appreciation or tax effects. A lower-yield property in a growing area may return more over time.
• Costs are the weak point. The net figure is only as good as your cost estimates. Get a real insurance quote and check the property tax bill, which may change after a sale.