Rental Property Yield Calculator
Calculate gross rental yield, net operating income (NOI), and net rental yield considering vacancy allowances and operating expenses.
Last verified: September 2026Inputs & Parameters
Calculation Results
Net Operating Income (NOI) excludes mortgage debt service, income taxes, and depreciation.
Analyzing Real Estate Returns: Gross Yield vs. Net Yield
Rental yield is one of the most critical metrics used by real estate investors, landlords, and commercial property analysts to evaluate the return on investment of an income-generating property. Evaluating both Gross Yield and Net Yield ensures you measure actual cash flow viability after accounting for ongoing operational overhead.
| Metric | Formula | Includes Expenses? | Primary Analytical Use |
|---|---|---|---|
| Gross Rental Yield | (Annual Gross Rent / Purchase Price) × 100 | No | Rapid preliminary screening of prospective market listings. |
| Net Rental Yield | (Net Operating Income / Purchase Price) × 100 | Yes | Realistic assessment of true financial returns after running costs. |
| Net Operating Income (NOI) | Effective Gross Rent - Operating Expenses | Yes | Fundamental metric for debt service and capitalization rate analysis. |
Factoring in Vacancy and Operational Reserves
Rental properties rarely experience 100% occupancy over multi-year holding periods. Factoring in a prudent vacancy allowance (typically 3% to 8%) along with ongoing operational expenditures—including property taxes, insurance, routine maintenance reserves, and property management fees—protects investors from overestimating returns.
Worked Example
A property purchased for $300,000.00 rented for $2,200.00/month, with a 5% vacancy allowance and $5,200.00 in annual expenses:
1. Annual Gross Scheduled Rent = $2,200.00 × 12 = $26,400.00
2. Gross Rental Yield = ($26,400.00 / $300,000.00) × 100 = 8.80%
3. Vacancy Loss (5%) = $26,400.00 × 0.05 = $1,320.00
4. Net Operating Income (NOI) = ($26,400.00 - $1,320.00) - $5,200.00 = $19,880.00
5. Net Rental Yield = ($19,880.00 / $300,000.00) × 100 = 6.63%
Assumptions & Limitations
Net operating income and net yield calculations exclude mortgage principal and interest payments (debt service), loan origination fees, depreciation tax deductions, and future capital appreciation. Consult a certified financial planner or tax advisor for complete commercial portfolio appraisals.