Property Investors

 Understanding Rental Yield

Rental yield is the return you earn from an investment property, calculated by comparing your rental income to the property’s value and ongoing costs.

Understanding how rental yield works helps you gauge the potential return from your investment, assess whether the property is performing well, and decide if a rent review or a different investment strategy may be worthwhile.

Knowing the rental yield can also help you compare properties, suburbs, or property types to find the right fit for your investment goals.

How to Calculate Rental Yield

There are two common types of rental yield: gross and net.

Gross Rental Yield

Gross rental yield is the annual rent you earn as a percentage of the property’s market value — before taking expenses into account.

How to calculate gross rental yield:

1. Add up your total annual rent.
2. Divide that figure by the current market value of the property.
3. Multiply by 100 to get the percentage.
   

Example:

If your property earns $30,000 per year in rent and is worth $500,000:
$30,000 ÷ $500,000 × 100 = 6% gross rental yield.

Net Rental Yield

Net rental yield gives a clearer picture of your actual return because it factors in the costs of owning the property.

How to calculate net rental yield:

1. Add up all your annual property-related expenses.
2. Subtract those expenses from your total annual rent.
3. Divide that figure by the property’s value.
4. Multiply by 100 to get the percentage.
   

Example:

If your property earns $30,000 per year in rent, costs $10,000 annually to maintain, and is worth $500,000:
($30,000 – $10,000) ÷ $500,000 × 100 = 4% net rental yield.

Typical expenses may include:

• Repairs and maintenance
• Strata levies (if applicable)
• Council and water rates
• Property management and advertising fees
• Landlord insurance
• Depreciation
  

Note: Loan interest is generally not included when calculating net rental yield, as it depends on your personal financing arrangements rather than the property’s performance. However, it should be considered separately when assessing your overall cash flow.

What Is a Good Rental Yield?

What’s considered a “good” rental yield depends on the property type and location.

As a general guide in 2025:

• Metropolitan areas (capital cities): Gross yields typically range between 3% and 5%.
• Regional areas: Yields are often higher, commonly 5% or more, though these markets can carry more variability and risk.
  

A higher yield usually means stronger cash flow, while a lower yield property may offer greater potential for long-term capital growth. The right balance depends on your personal investment goals.

The Bottom Line

Rental yield remains one of the most useful ways to compare and evaluate investment properties. Whether you’re focused on steady income, capital growth, or both, understanding how to calculate and interpret yield helps you make informed decisions in today’s property market.