Gross against net
Rental Yield Calculator
Gross rental yield is annual rent over price; net yield uses net operating income instead. On the example loaded below the two are 12.0% and 7.29% — a gap of 4.7 percentage points that goes entirely to vacancy and operating costs. Both are computed for you, and the gap is itemised.
Deal snapshot
Gross rental yield
12.00%
$31,800 of gross annual rent on a $265,000 price. Net yield, after every operating expense, is 7.29%.
Net yield
7.29%
Yield gap
4.71%
Net operating income
$19,310
GRM
8.33
Cash-on-cash
4.75%
Monthly cash flow
+$320
Gross rental yield
Gross yield = gross annual rent ÷ purchase price
= $31,800 ÷ $265,000
= 12.00%
Net operating income
NOI = effective gross income − operating expenses
NOI = $31,065 − $11,755
NOI = $19,310 per year
Cap rate
Cap rate = NOI ÷ purchase price
= $19,310 ÷ $265,000
= 7.29%
Your numbers
| Annual operating statement | Per year |
|---|---|
| Gross scheduled rent | $31,800 |
| Other income | $900 |
| Gross potential income | $32,700 |
| Vacancy and credit loss | ($1,635) |
| Effective gross income | $31,065 |
| Property tax | ($3,420) |
| Insurance | ($1,650) |
| Utilities | ($720) |
| Other operating | ($300) |
| Property managementon collected rent | ($2,485) |
| Maintenance reserveon scheduled rent | ($1,590) |
| CapEx reserveon scheduled rent | ($1,590) |
| Total operating expenses | ($11,755) |
| Net operating income | $19,310 |
| Annual debt servicenot an operating expense | ($15,469) |
| Pre-tax cash flow | +$3,841 |
Debt service sits below net operating income, never inside it. That single placement is what keeps cap rate a property metric instead of a loan metric.
| Acquisition | Amount |
|---|---|
| Purchase price | $265,000 |
| Loan amount | $198,750 |
| Down payment | $66,250 |
| Closing costs | $6,625 |
| Up-front rehab | $8,000 |
| Total cash invested | $80,875 |
| All-in costprice + closing + rehab | $279,625 |
| Monthly principal and interest | $1,289.09 |
- Break-even occupancy
- 82.2%
- Break-even rent
- $2,236 / mo
- Operating expense ratio
- 37.8%
- Year-one principal paydown
- $2,118
| Scenario | NOI | Cap rate | Cash-on-cash | DSCR | Cash flow / mo |
|---|---|---|---|---|---|
| -15% rent | $15,618 | 5.89% | 0.18% | 1.01 | +$12 |
| -10% rent | $16,848 | 6.36% | 1.71% | 1.09 | +$115 |
| -5% rent | $18,079 | 6.82% | 3.23% | 1.17 | +$218 |
| 0% rent | $19,310 | 7.29% | 4.75% | 1.25 | +$320 |
| +5% rent | $20,540 | 7.75% | 6.27% | 1.33 | +$423 |
| +10% rent | $21,771 | 8.22% | 7.79% | 1.41 | +$525 |
Each row is the whole model re-run with one variable moved — not a slope estimated from the base case.
Where the yield gap goes
The distance between a 12.0% gross yield and a 7.29% net yield is not a rounding error — it is $12,490 a year on a $265,000 property. Here is where every dollar of it goes.
| Line | Annual | Yield cost | Running yield |
|---|---|---|---|
| Gross scheduled rent | $31,800 | — | 12.00% |
| Other income | +$900 | +0.34% | 12.34% |
| Vacancy at 5% | −$1,635 | −0.62% | 11.72% |
| Property tax | −$3,420 | −1.29% | 10.43% |
| Insurance | −$1,650 | −0.62% | 9.81% |
| Utilities and other | −$1,020 | −0.38% | 9.42% |
| Management at 8% | −$2,485 | −0.94% | 8.49% |
| Maintenance reserve | −$1,590 | −0.60% | 7.89% |
| CapEx reserve | −$1,590 | −0.60% | 7.29% |
Property tax alone costs 1.29 percentage points of yield. Management and the two reserves together cost 2.14 points — more than tax and insurance combined, and they are the three lines most likely to be missing from a listing pro forma.
Gross yield is a listing metric; net yield is an ownership metric
Gross yield is easy to advertise because it needs two numbers off the listing page and no assumptions. That is exactly why it appears in marketing and why it is a poor basis for a decision. A 12% gross yield tells you rent is 1% of price a month — nothing more.
Net yield requires you to have an opinion about taxes, insurance, vacancy, management and reserves. Forming those opinions is the actual work of underwriting, and the calculator above exists to make each one visible rather than to hide it behind a single headline percentage.
Net yield still ignores your loan
Common questions about rental yield
- How do you calculate rental yield?
- Gross rental yield is annual rent divided by purchase price: $31,800 ÷ $265,000 = 12.0% on the example here. Net rental yield uses net operating income instead of gross rent: $19,310 ÷ $265,000 = 7.29%. The 4.7-point gap is the cost of vacancy and operating the property.
- What is a good rental yield?
- Gross yields of 8% to 12% are common in low-cost US markets and 4% to 6% in expensive metros. Net yield is the number that matters, and it should be compared to what your money earns elsewhere plus a premium for illiquidity and work. A 12% gross yield that nets 5% after a heavy tax bill is worse than an 8% gross that nets 6%.
- Is net rental yield the same as cap rate?
- Yes, when both are measured on purchase price — both are NOI divided by price. The terms differ mainly by geography and audience: cap rate is the US commercial convention, rental yield is more common in residential and international contexts. This site computes them identically and shows both.
- Why is my gross yield high but my net yield low?
- Because something in the expense stack is unusual. High property tax rates, coastal insurance premiums, HOA dues, owner-paid utilities in older multifamily buildings, or heavy vacancy in a weak submarket all widen the gap. Work down the statement in the calculator above — the line pulling the yield down is normally obvious once every item is visible.
- Should rental yield include the mortgage?
- No. Yield describes the property. Once financing is involved you are measuring your position rather than the asset, and the right metric is cash-on-cash return or total return on invested capital.
Net yield on purchase price is the same quantity as the cap rate. For the version that accounts for your mortgage, see cash on cash return, and for the crudest screen of all, gross rent multiplier.
The rest of the deal, on the same numbers
Your inputs are shared across every calculator on this site, so changing a figure here changes it everywhere.
- rental property calculatorThe full underwriting model: NOI, cap rate, cash-on-cash, DSCR, amortisation, a 30-year projection and a printable deal report.
- cap rate calculatorNet operating income divided by price, with every expense line shown and the debt service deliberately left out.
- dscr calculatorDebt service coverage ratio against real lender thresholds, plus the loan amount your NOI will actually support.
- cash on cash return calculatorAnnual pre-tax cash flow over every dollar of cash you put in — down payment, closing costs and rehab.
- rental property roi calculatorAll four return components — cash flow, principal paydown, appreciation and tax shelter — added up honestly.
- real estate investment calculatorYear-by-year projection to your exit, with equity multiple and IRR at every possible sale year.
- noi calculatorNet operating income built line by line from gross scheduled rent, and why the mortgage never appears in it.
- gross rent multiplierPrice divided by gross annual rent — the fastest screen there is, and the one that hides the most.
- brrrr calculatorBuy, rehab, rent, refinance, repeat — cash left in the deal, capital recycled, and infinite returns handled properly.
- fix and flip calculatorHard-money points and carry, contingency, selling costs and the ARV at which the project breaks even.
- house hack calculatorWhat your housing actually costs once tenants cover part of it, and what the building looks like after you move out.
- short term rental calculatorADR and occupancy through to NOI, with the long-term lease comparison that decides whether the extra work pays.
- seller financing calculatorOwner-carry notes: payment, balloon balance, interest to the balloon, and what the seller nets versus a cash sale.
- rental property depreciation calculator27.5-year straight line with the IRS mid-month convention, the annual tax shield, and recapture at sale.
- 1 percent rule real estateMonthly rent against purchase price, what the rule was calibrated for, and the interest rate at which it stops working.
- 50 percent rule real estateHalf of gross rent goes to operating expenses. Tested against your own itemised budget, line by line.
- 70 percent rule house flippingMaximum allowable offer for a flip: 70% of after-repair value, less the rehab budget.
- printable rental property deal reportThe whole analysis on one page, laid out for Letter and A4, ready to print or send to a lender.
- real estate investing terms glossaryEvery metric on this site defined once, with its formula and a worked example from the same deal.