Rental Yield Calculator: Gross Yield, Net Yield and How They Differ From Cap Rate

How do you calculate rental yield?

Multiply the monthly rent by 12, divide by the property price, and multiply by 100. That is gross yield. For net yield, take vacancy and running costs off the annual rent before you divide.

Running costs are what it takes to keep the property let: property tax, insurance, management, maintenance, and a reserve for big replacements. The mortgage is not a running cost in this sum. Yield describes the property. What the loan does to your return is a separate measure, covered further down.

Most yield calculators online ask for a price, a rent and one "expenses" box. That gives a number without showing which costs took the yield from the gross figure to the net one. This guide lists every line so you can check it. I build spreadsheet maths; I am not a landlord or an adviser, and this is not investment advice.

Rental yield calculator (free, no signup)

Enter the price, the monthly rent, your loan terms and your cost assumptions. The calculator returns net operating income, cash flow, cash-on-cash return and cap rate. It starts on the example house.

Two notes on reading it. The "Cap rate" line is the net yield on the purchase price; the two are the same sum. Gross yield is not shown because it needs no calculator: monthly rent x 12 / price. The results round to one decimal place, so the example's 5.97% shows as 6.0%.

Worked example: gross vs net yield on a $220,000 rental

A house bought for $220,000.00 and let at $1,850.00 a month has a 10.09% gross yield and a 5.97% net yield. The 4.12 points between them are vacancy and five running costs. Every input below is an assumption to replace.

Here is the walk from gross to net, one year at a time:

Costs take $9,066, which is 40.84% of the gross rent. That is why a gross yield on a listing tells you little by itself. Two houses with the same gross yield can have different net yields if one carries a higher tax bill or needs a manager.

Not sure which costs to list? The IRS gives a starting checklist. IRS Publication 527 names the most common rental expenses, including advertising, cleaning and maintenance, insurance, management fees, repairs, taxes and utilities. Its list also has mortgage interest and depreciation, which matter for tax but stay out of a yield sum.

Rental yield vs cap rate vs cash-on-cash return

They answer three different questions. Gross yield asks how much rent the price buys. Net yield and cap rate ask what the property earns after running costs. Cash-on-cash return asks what your own cash earns after the mortgage is paid.

Net yield and cap rate are the same arithmetic when both use the purchase price. The words differ by habit. Search suggestions for "rental yield calculator" are mostly UK, Australian and Indian, while US listings tend to say cap rate. Where they part is the bottom of the fraction. Cap rate is often quoted on current market value. Net yield is often worked on what you paid, sometimes with buying costs added, as in the third row.

The last row is the one that surprises people. The same house that yields 10.09% gross returns -0.06% on the buyer's cash, because $1,097.75 a month of mortgage takes all of the net income. I will not repeat those two measures here. The cap rate calculator guide shows how each cost assumption moves the cap rate, and the cash-on-cash return calculator guide shows how the down payment changes the last row.

Rental yield with a mortgage: the one comparison to make

Compare the net yield with the loan constant: a year of loan payments divided by the loan. If the net yield is lower, borrowing drags the return on your cash below the property's own yield. If it is higher, borrowing lifts it, before buying costs.

On the example, a $165,000.00 loan at 7% over 30 years costs $1,097.75 a month, or $13,173 a year. $13,173 / $165,000.00 = 7.98%. The property's net yield is 5.97%. Each borrowed dollar costs 7.98 cents a year in payments and earns 5.97 cents, so the loan pulls the cash-on-cash return down to -0.06%.

Bought with no loan, the same house needs $226,600 of cash (price plus 3% closing costs) and keeps all $13,134. That is 5.80%, the net yield on total cost. Neither answer is "right"; they describe different purchases. Part of each mortgage payment is principal, which builds equity and is not a cost in the way interest is, so cash-on-cash understates the full return. It does tell you whether the rent covers the bills.

What is a good rental yield?

There is no single good number, and I will not quote one. It depends on the interest rate you can borrow at, the costs in your area and how much risk you accept. A target yield is an assumption you set, then test listings against.

What I can show is what a target means in dollars. A 6% yield means $6,000 of rent a year for every $100,000 of price, or $500 a month. On a $220,000.00 house a 6% gross yield is $13,200 a year, which is $1,100 a month.

You can also turn a target around to get the most you could pay. Price = annual figure / target yield.

The two columns are far apart, which is the point: a target only means something once you say gross or net. One shortcut worth knowing is that the "1% rule" (monthly rent of at least 1% of the price) is the same thing as a 12% gross yield. On this house that would take $2,200 of rent. The rental property analysis spreadsheet guide covers that rule and the other screening rules.

Rental yield formula in Excel and Google Sheets

Put the price in B2 and the monthly rent in B3, then the cost assumptions below. Five formulas give gross yield, net income, net yield, net yield on total cost and the price a target implies. Format the yield cells as percentages.

Keep each cost in its own cell. A single "expenses" cell hides the assumption you most need to question.

Common rental yield mistakes

The usual mistake is comparing a gross yield with a net one. If a listing quotes a yield without listing costs, treat it as gross. On the example, 10.09% gross is 5.97% after costs.

• Using the asking rent. Yield is only as good as the rent figure. Use a rent the property has achieved, or comparable lets, not the hoped-for number.
• Leaving out vacancy. One empty month in a year is 8.33% of the rent. The example assumes 5%.
• Ignoring buying costs. Closing costs of $6,600 take the example's net yield from 5.97% to 5.80%.
• No reserve for big replacements. A roof or a boiler does not arrive every year, so it is missing from last year's costs. The example sets 5% of rent aside.
• Self-managing at zero. If you manage it yourself the fee is not paid, but your time is spent. Decide which yield you are measuring.
• Treating yield as the whole return. Yield ignores the mortgage, tax and any change in the property's value.

Yield calculator vs a full deal analyzer: which do you need?

For yield alone you need two cells and one division, and the calculator on this page does the net version. You do not need to buy anything for that. A deal analyzer earns its place when you are screening several listings and want the loan, the cash flow and the return on your cash in one file.

The Rental Property Deal Analyzer is $14.99 one-time for Excel and Google Sheets. You enter price, down payment, rate, term, closing and rehab costs, rent, vacancy and expenses. It returns the mortgage payment, monthly and annual cash flow, total cash invested, cash-on-cash return, cap rate and the 1% rule check, and colours each result green, amber or red against targets you set.

Two honest limits. It has no cell labelled "gross yield": multiply its 1% rule figure by 12 to get it. Its cap rate is the net yield on price. And it has one maintenance percentage, so add any CapEx reserve into that input. If those four results are what you want on every listing, the rental property calculator spreadsheet saves building them.

What to put in your yield sheet: price; buying costs; monthly rent; vacancy %; each running cost in its own cell; net operating income; gross yield; net yield on price and on total cost; your target yield; and the price that target implies.

Step-by-step: Rental Yield Calculator: Gross Yield, Net Yield and How They Differ From Cap Rate

1. Get the annual rent. Multiply the monthly rent by 12. Example: $1,850.00 x 12 = $22,200.
2. Calculate gross yield. Divide annual rent by the price and multiply by 100. Example: $22,200 / $220,000.00 = 10.09%.
3. Subtract vacancy. Take off the share of the year you expect the property to be empty. The example assumes 5%, or $1,110.
4. Subtract running costs. Take off property tax, insurance, management, maintenance and a replacement reserve. Leave the mortgage out. The example's costs and vacancy total $9,066.
5. Calculate net yield. Divide what is left by the price. Example: $13,134.00 / $220,000.00 = 5.97%.
6. Compare with the loan constant. Divide a year of mortgage payments by the loan. If that is above the net yield, borrowing lowers the return on your cash.

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