Gross and net yield start from the same two numbers — the rent a property earns and what the property is worth — and diverge over a single question: do you subtract the cost of owning the property before you divide? Gross says no; net says yes. That one difference is why an agent's “5.2% yield” and your own “4.3%” can both be right about the same property.
If you need the mechanics of the calculation itself, see how to calculate rental yield. This guide is about the difference between the two figures, and how to use it.
The distinction in one line
Gross yield is the rent against the price. Net yield is the rent after running costs against the price. Gross tells you how much a property brings in relative to its value; net tells you how much of that survives the cost of keeping it. The gap between them is, precisely, the cost of ownership expressed as a slice of yield.
Gross and net, side by side
Gross yield
(Annual rent ÷ value) × 100
The headline. Fast to work out from any listing, and useful for a first-pass ranking of one property against another. But it counts every dollar of rent as if you keep it, which no landlord does.
Net yield
((Annual rent − costs) ÷ value) × 100
The honest number. It takes out the recurring costs of ownership before dividing, so it reflects what the property actually returns you before financing and tax. It is the figure experienced investors lead with.
Notice what neither figure includes: loan repayments. Both gross and net yield describe the property itself, independent of how it is financed. The moment you bring the mortgage in, you have moved from yield to cash flow.
The costs that separate them
Everything that turns a gross yield into a net yield is an ongoing cost of holding the property. A reasonably complete list for an Australian investment property:
- Property management fees — commonly 5%–8.8% of rent collected, plus letting and lease-renewal fees.
- Council and water rates — payable whether or not the property is tenanted.
- Landlord and building insurance — cover for the building and for loss of rent.
- Repairs and maintenance — a realistic annual allowance, not zero, even on a good property.
- Strata or body corporate fees — for units and townhouses.
- Land tax — where the holding exceeds the state threshold.
What does not belong here: mortgage interest and principal (financing, not a property cost), one-off purchase costs like stamp duty (capital, not recurring), and capital improvements (they change the value, not the running cost). The full treatment is in how property expenses affect yield.
How big the gap usually is
As a rough rule, running costs consume somewhere between 20% and 30% of gross rent for a typical residential property — more for a strata unit with high body corporate fees, less for a freestanding house that is cheap to hold. That means net yield usually lands somewhere around three-quarters of gross yield.
So a property quoted at a 5% gross yield is realistically a net yield somewhere near 3.5%–4%. The gap is not a rounding error — it is often the difference between a property that looks like it beats a term deposit and one that, after costs, barely does.
A worked comparison
A $600,000 apartment rents at $520 a week — $27,040 a year. Running costs are heavier than average because of strata: $4,200 strata, $2,000 rates and water, $1,600 management, $900 insurance and $800 maintenance — $9,500 in total.
- Gross yield: $27,040 ÷ $600,000 = 4.51%
- Net yield: ($27,040 − $9,500) ÷ $600,000 = 2.92%
Costs eat 35% of the rent here, so net yield is barely two-thirds of gross — a 1.59 percentage point gap. An investor comparing this apartment on gross yield against a house quoted on net yield would reach exactly the wrong conclusion.
Why listings always quote gross
Sale listings and yield “guides” almost always quote gross, for two reasons. First, it is bigger — a higher number is easier to sell. Second, and more fairly, net yield depends on costs the seller cannot know: your management arrangement, your insurance, your maintenance standards. Gross is the only figure a listing can quote consistently.
That is not dishonest, but it does mean the responsibility to convert gross into net sits with you. Treat any advertised yield as gross unless it is explicitly stated otherwise, and discount it for costs before you compare it to anything.
Which figure to use, and when
- Use gross for a fast first screen. When you are filtering a long list of properties, gross yield is quick and consistent, and it is fine for ruling candidates in or out.
- Use net for any real decision. Once a property is a genuine contender, net yield is the figure that reflects what you keep — and the only fair basis for comparing properties with very different cost profiles.
- Use cash flow for the personal picture. Neither yield accounts for your loan. When you want to know what the property does to your bank balance, move to cash flow.
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