Rental yield expresses the rent a property earns as a percentage of what the property is worth. It converts two numbers that are hard to compare on their own — a weekly rent and a purchase price — into a single rate you can line up against other properties, other suburbs, or a term deposit. This guide walks through the calculation one decision at a time, because every one of those decisions moves the result.
If you would rather enter your own figures than work through formulas, the rental yield calculator produces gross and net yield side by side in seconds. If you want the concept first, start with what rental yield is and come back here for the mechanics.
The two inputs you need
Every yield calculation rests on just two numbers: the annual rent the property produces, and the value of the property. Get both onto a consistent, honest basis and the arithmetic is trivial. Rush either one — use the rent printed on the listing, or a value you hope the property is worth — and the yield you calculate describes a property that does not exist.
The two steps that follow deal with each input in turn: annualising the rent, and choosing which value to divide by.
Turning weekly rent into annual rent
Australian rent is almost always quoted per week, but yield is an annual measure, so the first job is to annualise. The correct conversion is to multiply the weekly rent by 52 — not by 4 and then 12, which gives 48 and understates the year by a month.
Annual rent = Weekly rent × 52
A property let at $600 a week produces $31,200 a year, not $28,800. If rent is quoted monthly instead, multiply by 12. Keep the period consistent all the way through — annual rent over an annual value gives an annual yield, which is what everyone means when they quote a yield percentage.
Which property value to use
This is the choice most people skip, and it quietly changes the answer more than any other. There are two defensible values you can divide by, and they answer different questions:
Purchase price
Yield on what you paid. This is the right basis when you are assessing a purchase, or measuring how the deal you did is performing against the price you committed. It stays fixed over time, so it shows how the original decision has aged.
Current market value
Yield on what the property is worth today. This is the right basis for deciding whether to keep holding — it reflects the capital currently tied up in the property, which is what you could redeploy if you sold.
Neither is wrong; they simply answer “was this a good buy?” versus “is this a good hold?”. The only real mistake is being inconsistent — comparing one property's yield on purchase price with another's on current value tells you nothing. Pick a basis and apply it across everything you compare.
The gross yield formula
Gross yield is the headline figure. It divides annual rent by the property value, before a single expense is taken out.
Gross yield = (Annual rent ÷ Property value) × 100
A $700,000 property earning $31,200 a year has a gross yield of 4.46%. Gross yield is fine for a first-pass comparison because it is quick and every listing gives you the inputs, but it flatters the return — it ignores the real cost of owning the property. That is what net yield fixes.
The net yield formula
Net yield subtracts the ongoing costs of ownership from the rent before dividing. It is the number that comes far closer to what you actually keep.
Net yield = ((Annual rent − Annual costs) ÷ Property value) × 100
“Annual costs” here means the running costs of holding the property — council and water rates, landlord insurance, property management fees, repairs and maintenance, strata or body corporate fees, and land tax where it applies. It does not include loan repayments: yield measures the property, not how you financed it. Financing belongs in cash flow, a separate and personal calculation.
For a full account of which costs belong in the net figure and how much each one drags the result, see how property expenses affect yield.
Adjusting for vacancy
Both formulas above assume the property is rented every week of the year. Real properties sit empty between tenants, so the yield you actually achieve is a little lower than the one you calculate from full-occupancy rent. To get an effective yield, reduce the annual rent for the vacancy you realistically expect before you run either formula.
Collected rent = Weekly rent × (52 − vacant weeks)
A property advertised at $600 a week that typically sits empty two weeks a year collects $30,000, not $31,200. That is a small adjustment on one property and a decisive one across a portfolio — it is the difference between the rent on the lease and the rent in your account.
A full worked example
A $750,000 property is advertised at $650 a week. Assume two weeks of vacancy a year, and annual running costs of $6,500 — rates, insurance, management and maintenance.
- Advertised annual rent: $650 × 52 = $33,800
- Collected rent after 2 weeks vacancy: $650 × 50 = $32,500
- Gross yield (collected): $32,500 ÷ $750,000 = 4.33%
- Net yield: ($32,500 − $6,500) ÷ $750,000 = 3.47%
Same property, three different “yields” — 4.51% on advertised rent, 4.33% once you allow for vacancy, and 3.47% once costs come out. All three are arithmetically correct. Only the last one describes what the property actually returns.
Common mistakes that distort yield
- Using the asking rent, not the achievable rent. Listing rents are optimistic. Use a figure you can defend against comparable lets in the same street.
- Forgetting vacancy. A yield built on 52 weeks of rent is a best-case number, not a realistic one.
- Mixing value bases. Comparing yield on purchase price against yield on current value produces a meaningless ranking.
- Quoting gross as if it were net. The gap between the two is the entire cost of ownership — nearly a full percentage point in the example above.
- Putting the loan into yield. Interest is a financing cost, not a property cost. It belongs in cash flow, which is why two investors can hold the same property at the same yield and very different cash positions.
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