Rental Yield Calculator

When an agent says a property yields 4 percent, they usually mean yearly rent divided by price. That is the gross yield, and it is a good way to compare properties quickly, but it leaves out most of what an owner actually pays. The net yield puts those costs back. The distance between the two figures shows how much of the rent is real income, and the years-to-repay figure puts the investment on a time scale.

Gross yield

Gross yield = rent for 12 months ÷ price. It uses the full year’s rent as if the property were let all the time, and it ignores every cost. It is convenient for comparing a flat in one area with a flat in another, which is why it is what advertisements quote. For the sample 80 lakh flat with a rent of 28,000 a month, the gross yield is 4.20%.

Net yield

Net yield starts from the rent actually collected, which is lower if the property is empty for part of the year. It subtracts maintenance, society charges and repairs, property tax and insurance, and the agent or management fee as a percentage of the rent collected. The result is divided by the price plus the buying costs, such as stamp duty, registration and brokerage, because that is the money you really laid out. In the sample, 11 months of rent is 3,08,000, costs are 69,400, so net income is 2,38,600 and the net yield is 2.79%. You keep 71.0% of the full year’s rent.

Years to repay

Dividing the price and buying costs by the yearly net income shows how many years of rent it would take to pay back the investment. The sample needs 35.9 years, which tells you the return must come largely from the rise in the property’s value, not from rent. The second sample, a 35 lakh flat let all year at 16,000 a month with costs of 18,000, has a gross yield of 5.49%, a net yield of 4.69%, keeps 90.6% of the rent and repays in 21.3 years.

What empty months do

Each month the property is empty removes a twelfth of the rent. One empty month turns 3,36,000 of rent into 3,08,000, a drop of 8.3%, and the agent fee falls too. If you expect gaps between tenants, even a single month a year makes a visible dent in the net yield, which is why landlords value reliable long-term tenants. Try zero, one and two months to see the range.

Comparing properties

Use the same assumptions for every property you compare. A cheaper flat in a lower-priced area often has a higher gross yield but higher vacancy, and a prestigious area has the reverse. Yield alone does not show growth, tenant demand or repair risk. A property in a rising area can have a low yield today and still be a better investment because the rent and price rise.

Limits

Loan interest, income tax on rent, depreciation, big repairs and rent growth are not included. The costs are yearly amounts you enter, and the page does not know the typical level in your area. For an investment with a loan, move to the cap rate calculator.

Related tools

• Cap Rate Calculator adds a loan and shows cash flow and coverage.
• Price per Sq Ft Calculator compares what you pay for area in different properties.
• Stamp Duty Calculator estimates the buying cost that goes into the net yield.
• Rent vs Buy Calculator looks at the choice if you intend to live in the home.