How the rental yield calculator works out gross and net yield
Rental yield expresses the annual income from a property as a percentage of its value. The calculator reports two measures. Gross rental yield is the weekly rent multiplied by 52, divided by the property value and multiplied by 100. It assumes the property is let for the entire year and takes no account of costs. It is the figure most often quoted in listings, suburb profiles and market reports, because it requires only two pieces of information and may be calculated for any property within seconds.
Net rental yield is a stricter measure. The calculator multiplies the weekly rent by 52 less the number of vacant weeks entered, deducts the annual costs entered, and divides the remaining net income by the property value. The headline result is the net yield, shown together with net income in dollars. Loan repayments and income tax are not part of either calculation, because yield describes the performance of the property and not the finances of a particular owner.
Gross vs net rental yield: illustrative examples
Consider a hypothetical house valued at $600,000 and let at $500 per week. Annual rent is $26,000, which is a gross yield of 4.33%. With an allowance of two vacant weeks, the rent collected falls to $25,000. Annual costs of $7,000 leave net income of $18,000, which is a net yield of 3.00%. In this illustrative case, costs and vacancy together absorb approximately 31% of the gross rent, a proportion that is easily overlooked when only the gross figure is quoted.
Now consider a hypothetical apartment valued at $500,000 and let at $520 per week. Annual rent is $27,040 and the gross yield is 5.41%, which appears considerably more attractive than the house. If strata levies raise annual costs to $11,000, and two vacant weeks are again allowed, the rent collected is $26,000 and net income is $15,000. The net yield is 3.00%, identical to that of the house. The comparison of gross vs net rental yield shows why two properties should not be ranked on the gross figure alone.
Choosing the inputs: property value, weekly rent and vacancy
For a prospective purchase, the property value is ordinarily the expected purchase price. Some investors add transfer duty, legal fees and other acquisition costs, which produces a lower and more conservative yield on the total outlay. For a property already owned, the current market value is generally more informative than the original price, because it measures the return on the capital presently tied up in the asset. Whichever basis is adopted, it should be applied consistently to every property in a comparison.
Weekly rent should reflect achievable market rent, supported by recent leases of comparable properties and not by advertised asking rents alone. The vacancy allowance accepts between zero and twelve weeks per year. An allowance of two weeks is a common planning assumption, equivalent to approximately one vacant month every two years. A higher allowance may be appropriate in areas with elevated vacancy rates, for student or holiday accommodation, or where the property is likely to need work between tenancies.
Costs to include when calculating net rental yield
The accuracy of the net yield depends on a complete account of recurring costs. These generally include property management fees, which are commonly charged as a percentage of rent collected, together with letting and advertising fees, council rates, water charges, landlord and building insurance, repairs and maintenance, and land tax where the relevant state threshold is exceeded. Apartments and townhouses also attract strata or owners corporation levies, which may be substantial in buildings with lifts, pools or extensive common property.
Management fees must be entered as part of annual costs in this calculator. This differs from the BorrowWise investment property calculator, which adds a 7% management fee automatically. On the hypothetical $500 per week property above, a 7% fee would be $1,820 per year. An annual maintenance allowance is also advisable even where no repair is expected in the first year, since hot water systems, appliances and floor coverings are replaced at irregular intervals and an average year will include some expenditure of this kind.
Loan interest is conventionally excluded from rental yield. Including it would make the result depend on the size of the deposit and not on the quality of the property. Depreciation and capital works deductions are also excluded, since they are tax concepts and not cash costs. The ATO explains that acquisition and disposal costs, such as conveyancing, are not deductible against rent and are usually included in the cost base of the property for capital gains tax purposes.
What is a good rental yield in Australia
No single figure defines a good rental yield. Commentators commonly cite gross yields of approximately 3% to 5% for capital city dwellings, with higher figures in some regional and lower-priced markets, but these ranges move with the property market and differ between houses and units. A yield is best assessed against comparable properties in the same area, against the investor's borrowing costs, and against the returns available from other assets. Moneysmart suggests that investors research areas with sound growth prospects, higher rental yield and low vacancy rates.
An unusually high yield is not necessarily favourable. Yield rises when the price is low relative to rent, which may indicate weak buyer demand, dependence on a single local employer, an unusual property type, or rents that are temporarily inflated. An unusually low yield may reflect strong expectations of capital growth already built into the price. Yield is therefore a starting point for further enquiry. It identifies properties that merit closer examination and does not, on its own, establish that an investment is sound.
Rental yield compared with capital growth and total return
The total return on a property comprises income, measured by yield, and capital growth, which is the change in value over time. The two frequently pull in opposite directions. Inner metropolitan houses have commonly shown lower yields and stronger long-term growth, while regional areas and lower-priced units have commonly shown higher yields and less consistent growth. Past patterns do not reliably predict future results. The balance an investor strikes between income and growth ordinarily reflects the capacity to fund a shortfall and the intended holding period.
Yield also changes as its components change. Where values rise more quickly than rents, yields fall even though the owner is no worse off, and the reverse applies when values fall. Tax treatment differs as well. Net rental income is assessable each year, while a capital gain is taxed only when the property is sold. The ATO has confirmed that the capital gains tax rules for individuals change for gains accruing after 1 July 2027, so advice from a registered tax agent is advisable before a sale.
How lenders and investors use rental yield
Lenders do not use net yield directly, but the rent that underlies it matters to a loan application. Lenders generally count only a proportion of gross rent when assessing serviceability, and APRA expects repayments to be tested at 3 percentage points above the actual interest rate. A higher-yielding property therefore contributes more assessable income relative to the debt required to buy it. The BorrowWise borrowing power calculator gives a general indication of capacity, although each lender's treatment of rental income differs.
Investors commonly compare net yield with the interest rate on the loan. Where the net yield is below the interest rate, a highly geared purchase is likely to produce a cash shortfall, which the owner must fund from other income. From 1 July 2027, the ATO states that negative gearing for residential property is limited to new builds, with properties held at 7:30pm AEST on 12 May 2026 exempt. For established dwellings bought after that time, the pre-tax rental property cash flow becomes a more important consideration, and yield carries correspondingly greater weight.
Common mistakes when calculating rental yield
The most common mistake is to compare the gross yield of one property with the net yield of another, or to accept a quoted yield without asking which measure it is. Other frequent errors include relying on an optimistic rent estimate supplied by a selling agent, omitting strata special levies and land tax, assuming no vacancy, and ignoring letting fees charged each time a new tenant is placed. Each of these errors overstates the income the property is likely to produce.
A further error is to mix valuation bases, for example by calculating one yield on the purchase price and another on the total acquisition cost. On the hypothetical $600,000 house above, adding $32,000 of assumed purchase costs reduces the gross yield from 4.33% to 4.11% and the net yield from 3.00% to 2.85%. Neither basis is incorrect, but the results are not comparable with one another. Yields quoted for a suburb are also averages, and an individual property may differ considerably from the median.
Acting on the result and related calculators
The result is most useful as a screening tool. An investor may calculate net yield for each property on a shortlist using the same assumptions, set aside those that fall well below comparable properties, and then examine the remainder more closely. Entering a lower rent, a longer vacancy or higher costs shows how much margin exists before the income return becomes unacceptable. Moneysmart also recommends checking whether all expenses could be covered for a period with no tenant.
Yield does not show whether a property is affordable to hold. The investment property calculator adds loan costs and an estimate of the tax effect to produce weekly cash flow before and after tax. The stamp duty calculator estimates transfer duty for a yield based on total cost, and the home equity calculator indicates the deposit that may be available from an existing property. The guides to negative gearing, interest rates and the property market provide further general information.
Rental Yield Calculator: frequently asked questions
How do you calculate rental yield?
Gross rental yield is the weekly rent multiplied by 52, divided by the property value and multiplied by 100. Net rental yield deducts annual costs, such as management fees, rates, insurance and repairs, together with an allowance for vacant weeks, before dividing by the property value. For example, $500 per week on a hypothetical $600,000 property is a gross yield of 4.33%.
What is a good rental yield in Australia?
No universal benchmark applies. Gross yields of approximately 3% to 5% are commonly cited for capital city dwellings, with higher figures in some regional markets, but the range shifts with prices, rents and interest rates. Investors generally compare a property with similar properties nearby and with their borrowing costs. A higher yield improves cash flow but may be accompanied by lower expected growth or higher risk.
What is the difference between gross and net rental yield?
Gross yield is based on a full year of rent and ignores the costs of ownership. Net yield deducts recurring costs and vacancy, and therefore indicates the income actually retained before loan interest and tax. Net yield is the more useful measure for comparing properties, particularly where strata levies, land tax or maintenance costs differ considerably between them.
Is loan interest included in rental yield?
Conventionally it is not. Rental yield measures the income return on the property irrespective of how the purchase is financed, so loan repayments are excluded. Interest is taken into account when cash flow and gearing are assessed. The BorrowWise investment property calculator models that separately, together with an estimate of the position after tax.
Do houses or apartments have higher rental yields?
Apartments have commonly shown higher gross yields than houses in the same area, because their prices are lower relative to rent. Strata levies reduce the net yield, and houses have commonly shown stronger capital growth because of their larger land component. These are general tendencies only. Individual properties and locations vary widely, and past patterns may not continue.
Should rental yield be calculated on the purchase price or the current value?
Both approaches are used. A buyer ordinarily uses the purchase price, sometimes with transfer duty and legal fees added for a more conservative figure. An existing owner may prefer current market value, since it measures the return on the capital presently tied up in the property and assists a decision to hold or sell. The important point is to apply one basis consistently.
How many weeks of vacancy should be allowed for a rental property?
An allowance of two weeks per year is a common planning assumption, broadly equivalent to one vacant month every two years. A higher allowance may suit areas with elevated vacancy rates, student or holiday accommodation, or properties that require work between tenancies. Local vacancy rates published by industry bodies and research firms provide a useful reference point.
Is a high rental yield better than capital growth?
Neither is better in all circumstances. A high yield supports cash flow and reduces reliance on other income, while capital growth builds wealth that is realised only on sale or through borrowing against equity. Properties with high yields have commonly shown lower growth, and the reverse. The suitable balance depends on the investor's income, borrowing level, time horizon and tolerance for risk.