Gross rental yield compares annual rent with a property’s stated value or cost before operating expenses. Net rental yield subtracts selected operating costs first. Gross yield is useful for a quick screen; net yield gives a clearer—but still incomplete—view of operating income.
How do you calculate gross and net rental yield?
Both figures are percentages, and both divide an annual income measure by a stated property value or cost basis. The difference is whether operating expenses are deducted from rent first.
| Measure | Formula | What it shows |
|---|---|---|
| Gross rental yield | Annual rental income ÷ stated property value or cost basis × 100 | Rent relative to the chosen property basis, before operating expenses. |
| Net rental yield | (Annual rental income − selected annual operating costs) ÷ the same stated property value or cost basis × 100 | Rent remaining after the costs included in the calculation, relative to that basis. |
National Australia Bank (NAB) uses property value as the denominator in its gross-yield formula. Its worked example—$25,000 annual rent on a $500,000 property—produces a 5% gross yield; this is an illustration, not a market benchmark. NAB’s rental-yield explanation was accessed in 2026. The Chartered Institute for Securities & Investment (CISI) gives the equivalent net formula: annual rent less operating costs, divided by property value. CISI’s investment-management study material describes that calculation.
A worked illustration
Suppose a property has $25,000 in annual rent, $8,000 in annual operating costs, and a stated value of $500,000. The gross yield is $25,000 ÷ $500,000 × 100 = 5%. After the assumed costs, net operating income is $17,000 and net yield is $17,000 ÷ $500,000 × 100 = 3.4%. The $8,000 cost figure is invented for this arithmetic example; it is not a typical-cost estimate.
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Which costs should you include in net rental yield?
There is no universal boundary for “net” yield, so name the costs you count. CISI lists property taxes, management fees, buildings insurance, maintenance and upkeep, and acquisition or transaction fees as possible deductions. CISI’s material treats these as possible expenses rather than a single mandatory list.
For a useful operating comparison, say whether rent is actual rent received or potential rent at full occupancy, and whether vacancy or collection losses have reduced it. Also distinguish recurring operating costs from one-time purchase or transaction costs. BMT Quantity Surveyors notes that vacancy exposure and different cost structures can change comparisons. Its rental-yield guide also separates gross yield from financing costs, taxation considerations, and capital growth.
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Keep mortgage interest and personal tax treatment out of a simple net-yield figure unless you explicitly define a broader cash-flow or after-tax calculation. Otherwise, readers may mistake an operating-income measure for the amount an owner actually keeps.
How can you compare two properties fairly?
Use the same assumptions on both sides. In particular, keep the denominator, rent basis, vacancy treatment, and cost categories consistent. BMT identifies purchase price, current market value, and total capital invested as possible denominator choices; changing the basis can change the percentage even when the rent is unchanged.
Do these 3 things before closing this tab:
1Repair Windows errors before they cause bigger problems2Fix the driver behind crashes, sound loss and screen glitches3Clear out junk files and repair common Windows errors- Denominator: State whether you use purchase price, current market value, or total capital invested.
- Rent basis: Use actual rent received or potential rent consistently, and disclose any vacancy or collection-loss assumption.
- Costs: Apply the same recurring expense categories to each property and identify any one-time fees included.
- Yield type: Do not compare one property’s gross yield with another’s net yield as if they were equivalent.
BMT provides another worked example: $550 weekly rent, $28,600 annual rent, and a $650,000 property value yield approximately 4.4% gross. This is an example, not a market statistic. The calculation assumes the stated annual rent and value; it does not establish a typical yield for any market.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What do gross and net yield tell you—and what don’t they?
Gross yield is quick to calculate and can help screen properties before examining their costs. Net yield adds operating expenses, so it gives a more informative view of operating income under the assumptions you chose. Neither alone establishes which property is the better investment. NAB advises considering cash flow, expenses, location, and long-term growth potential alongside yield.
Net rental yield is not automatically an investor’s complete “real return.” Financing, personal tax position, capital growth or loss, transaction costs, and the timing of cash flows may need separate treatment. A capitalization rate, cash-on-cash return, and total return are related measures, but they are not interchangeable with a simple gross-versus-net rental-yield comparison.
No market-wide figure establishes what counts as a “good” rental yield here. The cited worked examples illustrate the arithmetic; they are not benchmarks. Treat a yield as a comparison tool whose meaning depends on its denominator, rent assumptions, and included costs.
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