Why Calculate Rental Yield?
Rental yield is the most important metric for any real estate investor. It helps you understand the return on your investment property before factoring in capital growth. A higher yield means better cash flow, which can protect you during economic downturns or interest rate hikes.
Gross vs. Net Rental Yield
- Gross Yield: Total annual rent divided by property value. Useful for quick comparisons between different properties or neighborhoods.
- Net Yield: Total annual rent minus annual expenses, divided by property value. This gives a much more accurate picture of your actual return on investment.
Typical Investment Property Expenses
| Expense Type | Description |
|---|---|
| Property Management | Usually 5% to 10% of gross rent. |
| Maintenance & Repairs | Rule of thumb: 1% of property value annually. |
| Strata / HOA Fees | Common in apartments and townhouses. |