Gross and net rental yield.
Net rental yield
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Gross yield
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Net annual income
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Gross yield flatters, net yield tells the truth
Rental yield is the annual rent expressed as a percentage of the property value, and it is the quickest way to compare two investment properties on income alone. Gross yield uses the rent before any costs. Net yield strips out the unavoidable holding costs, which is the number that actually lands in your pocket. Agents quote gross because it looks bigger. A serious investor watches net. This calculator gives you both, and it goes a step further by allowing for vacancy, because a property is rarely tenanted every single week of the year.
How the net figure is assembled
The tool annualises your weekly rent over 52 weeks, then trims it for the vacancy percentage you set, since an empty week earns nothing. From that effective rent it subtracts your fixed annual costs, things like council rates, strata levies, and landlord insurance, and then a property management fee charged as a percentage of the rent collected. What remains is your net annual income, and dividing it by the property value gives the net yield. The order matters: management fees are taken on the rent you actually receive, not on the gross before vacancy.
Notice what the calculation deliberately leaves out. There is no mortgage interest here, because yield measures the property's earning power, not the return on your particular deposit. There is also no allowance for one off capital expenditure such as a new roof or hot water system, which a sinking fund or your own reserve should cover. Treat the net yield as the steady state income return, then sanity check it against the lumpy repair costs that every older property eventually throws up.
A $750,000 unit returning $600 a week
Run the defaults. A $750,000 property rents for $600 a week, carries $8,000 a year in rates, strata, and insurance, pays a 7 percent management fee, and sits empty for about 2 percent of the year.
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The gross looks like a respectable 4.16 percent, but costs and vacancy drag the real return down to 2.72 percent. That 1.44 point gap is the difference most beginners overlook.
Why Australian investors accept thin yields
A net yield under 3 percent would alarm an investor in many markets, yet it is normal for houses in Sydney, Melbourne, and Brisbane. The reason is that Australian residential investors chase capital growth, not income, and the tax system reinforces that choice. Negative gearing lets a cash flow loss reduce taxable income today, and the 50 percent CGT discount on assets held beyond twelve months rewards the eventual sale. Units and regional towns usually post higher yields than blue chip capital city houses, so use this tool to compare like with like. A practical tip: model vacancy honestly. Even one extra empty fortnight a year on a $600 rental wipes out more than a thousand dollars and visibly moves the net yield, which is why a 0 percent vacancy assumption is wishful thinking.
Frequently asked questions
Should I use the purchase price or the current value for yield?
For deciding whether to buy, use the asking or purchase price, since that is the capital at risk. To judge an existing holding, use the current market value, because that is what your money could fetch elsewhere. A property bought cheaply years ago can show a flattering yield on cost while offering a poor yield on today's value.
Does net yield account for my mortgage?
No. Yield is a property level measure that ignores how you financed it, so two buyers paying different deposits see the same net yield. To bring loan interest into the picture you want a cash flow or negative gearing calculation, which compares rent against your actual repayments and tax position.
Are strata levies really worth deducting in the yield?
Absolutely, for units they are often the single largest cost after the mortgage. Special levies for major repairs can run into thousands in a single year and crush the net yield, so when you assess an apartment, ask for the strata report and budget for both ordinary and sinking fund contributions.