Rental yield is often used to compare investment properties, but a single percentage can hide important differences in costs and risk. It is worth understanding exactly what a yield calculation includes.
What to consider
Gross yield is usually calculated by dividing annual rental income by the purchase price and multiplying by 100. It does not deduct levies, rates, insurance, maintenance, letting fees, vacancies, transaction costs or loan interest. Net operating yield uses a defined set of operating expenses, so check how each calculation is presented.
A practical checklist
Use a conservative achievable rent, estimate recurring costs from documents, allow for vacancies and repairs, and model loan repayments separately. Test what happens if rent is lower or expenses rise. Do not compare two properties unless the assumptions and calculation method are consistent.
The takeaway
A yield figure is a screening tool. A realistic cash-flow model and due diligence matter far more than an attractive headline percentage.
This article provides general educational information. Requirements and circumstances vary; confirm important legal, tax, lending or technical matters with current official guidance and a qualified professional.
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