Gross Rental Yield
Annual rent as a percentage of property price.
Formula
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Example
R=$2000, V=$480k: Y = 5%
How it works
Gross rental yield measures how much income a property generates in a year compared with what the property is worth. The formula multiplies monthly rent by 12 to convert it into annual rent, then divides by the property value so the result is a proportion of the purchase price; multiplying by 100 turns that proportion into a percentage. It gives a quick way to compare properties as income-producing investments, without yet considering expenses like taxes, repairs, or vacancy.
When to use it
Use this when comparing rental properties to see which one produces more rent relative to its price. It is common in property investing, buy-to-let screening, and checking whether a listing seems priced fairly for its rental income.
Worked example, step by step
Monthly rent, R = $1,500 Property value, V = $360,000 Y = (12R / V) × 100 Y = (12 × 1,500 / 360,000) × 100 Y = (18,000 / 360,000) × 100 Y = 0.05 × 100 Y = 5% So the gross rental yield is 5%.
Common mistakes to avoid
- Using yearly rent in the formula but still multiplying by 12 again
- Dividing by the rent instead of the property value
- Forgetting that this is gross yield, so it does not include expenses
Did You Know?
Gross yield ignores costs; net yield after fees, tax and vacancy is usually a couple of points lower.
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