Gross and net yield on a rental.
Gross yield
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Net yield
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Net rent a year (before mortgage)
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Gross yield is the headline, net yield is the truth
Yield tells you what income a property throws off relative to its price, expressed as a percentage. Gross yield is the simple version: annual rent divided by purchase price. It is the number you see in listings and agent pitches, and it is useful for a quick comparison, but it flatters every property because it ignores the cost of running the place. Net yield is the figure that actually pays your bills. It takes the same annual rent, subtracts the running costs of rates, insurance, maintenance, and property management, and then divides by the price. The gap between the two tells you how expensive the property is to hold.
A $700,000 rental at $650 a week
Run the defaults. Rent of $650 a week is $33,800 a year. On a $700,000 purchase price that is a gross yield of 4.83 percent. Now subtract $9,000 of annual costs and the net rent drops to $24,800, which is a net yield of 3.54 percent. That difference, roughly 1.3 percentage points, is the running cost of the asset eating into your return. The table sets it out.
| Measure | Calculation | Result |
|---|---|---|
| Annual rent | $650 × 52 | $33,800 |
| Gross yield | $33,800 / $700,000 | 4.83% |
| Net rent | $33,800 less $9,000 | $24,800 |
| Net yield | $24,800 / $700,000 | 3.54% |
What counts as a good yield in New Zealand
It depends heavily on where the property is. Main-centre yields in Auckland and Wellington often sit around 3 to 4 percent gross, because high purchase prices drag the percentage down. Provincial towns and smaller cities can run 5 to 7 percent gross or higher, where prices are lower relative to rents. A higher yield is not automatically better, though. The lower-yielding main centres have historically delivered stronger capital growth, while higher-yielding regions trade some of that growth for income now. Many New Zealand rentals are deliberately negatively geared, meaning the rent does not cover the mortgage and costs, and the investor is betting on long-run capital growth to make the deal work.
What this tool leaves out, and why it matters
Notice the net-rent figure here is before your mortgage. The calculator stops at operating costs on purpose, because yield is a property-level measure that should not depend on how you happen to finance it. Your actual cash position will be lower once interest is paid, and that is where the rental income tax tool takes over. A practical tip when comparing two properties: always rebuild both yields with realistic costs rather than the optimistic figures in a sales pack. Agents often quote gross yield on an inflated rent estimate and omit body corporate levies, which can run into thousands a year on an apartment and quietly halve the net yield. Vacancy is the other silent cost. If a property sits empty for three weeks a year, your real rent is closer to 49 weeks than 52, and the yield falls accordingly.
Should I include the mortgage in the yield?
No. Keep the mortgage out of yield so you can compare properties on equal footing regardless of your deposit or loan rate. Yield measures the asset; financing measures your personal deal on it. Once you know the net yield, use a separate cash-flow or rental income tax calculation to layer in interest and tax and see whether the property is cash-flow positive for you specifically.
Is a low yield always a bad investment?
Not necessarily. A 3 percent net yield in a high-growth suburb can outperform a 6 percent yield in a flat market once you add capital growth, which New Zealand does not generally tax outside the bright-line test. The trap is buying a low yield and assuming growth will rescue it, because growth is never guaranteed and a low yield means the property bleeds cash while you wait. Weigh both: a defensible yield today and a credible growth story, not one at the expense of the other.