What Is Rental Yield and How to Calculate It Before You Buy

If you are looking at a buy-to-let property, the listing price and the headline rent only tell you half the story. The number that decides whether a deal is worth doing is the rental yield — annual rent as a percentage of the price you pay.

This post walks through what rental yield actually is, the three versions every landlord should know (gross, net, and cash-on-cash), and the rules of thumb that separate a good investment from a bad one in the current market.

The three versions of rental yield

1. Gross rental yield

The simplest version. Take 12 months of rent, divide by the purchase price, multiply by 100.

Gross yield % = (Annual rent ÷ Purchase price) × 100

Worked example: a $300,000 property that rents for $2,000/month has a gross yield of (24,000 / 300,000) × 100 = 8.0%.

Gross yield is the figure agents put in their listings because it is the largest one. It ignores every cost of running the property.

2. Net rental yield

Subtract the actual running costs from the rent before dividing.

Net yield % = ((Annual rent - Annual costs) ÷ Purchase price) × 100

Annual costs typically include: property management (6-10% of rent), insurance, maintenance reserve (5-10% of rent), vacancy allowance (5-8% of rent), landlord income tax, HOA / body corporate fees, and any utilities the landlord pays.

Worked example: $24,000 rent minus $7,000 in costs = $17,000 net. $17,000 / $300,000 = 5.67% net yield. The 8% headline became a 5.67% real number.

3. Cash-on-cash return

For a leveraged deal (most buy-to-let purchases), the most honest figure is the return on the cash you actually put in — the deposit, closing costs, and renovation — not on the total purchase price.

Cash-on-cash return % = (Annual net cashflow ÷ Cash invested) × 100

Annual net cashflow = annual net rent − annual mortgage payments.

Worked example: $24,000 rent − $7,000 costs − $14,400 in mortgage payments = $2,600 net cashflow. If you invested $60,000 cash (20% down + closing), that is $2,600 / $60,000 = 4.33% cash-on-cash return. After mortgage paydown and price appreciation, the total return is higher; the cash-on-cash number captures only the year’s dividend.

What is a “good” rental yield?

It depends on the market and on the cost of money.

• 5-7% gross is typical for stable urban markets in 2026 (US Sunbelt, UK Midlands, German secondary cities). Cap rates are compressed by low interest rates and high demand.
• 8-10% gross is the range for higher-risk markets (small-town US Midwest, parts of the UK North, Spanish interior) or for properties that need significant work.
• 10%+ gross usually means a high-vacancy or distressed-asset scenario; the headline yield is high because the underlying risk is high.

For net yield, subtract 2-3 percentage points to account for costs. For cash-on-cash, expect 4-8% in a normal market; above that, check the assumptions.

Common mistakes that make rental yield look better than it is

1. Ignoring vacancy. A 5% vacancy assumption knocks 5% off gross. Many real-world units sit empty 8-10% of the year between tenants.
2. Using the asking rent, not the achieved rent. The actual rent you will collect is typically 5-10% below the listing.
3. Ignoring maintenance. A 5-7% annual maintenance reserve is realistic. The first 5 years of a new property are cheap; years 8-15 are when the big-ticket items come up (HVAC, roof, water heater, appliances).
4. Forgetting income tax. Rental income is taxable in most jurisdictions. The net is what hits the bank, not the gross.
5. Confusing gross and net. The 8% gross may be 4-5% net. Run both numbers, every time.

How to run the numbers

For a quick check on a single property, the Uttir Rental Yield Calculator runs all three yields (gross, net, cash-on-cash) in one pass — purchase price, monthly rent, all the costs, down payment, and mortgage rate. Runs in your browser, no signup, no upload.

For more complex decisions (compare two properties, model a refinance, plan a portfolio), the Uttir Mortgage Calculator and Loan Amortization Calculator cover the financing side, and the Break-Even Calculator is the right tool for the “how long until this pays off” question.

Bottom line

Rental yield is the cleanest way to compare two buy-to-let properties on equal terms. Always run gross, net, and cash-on-cash — the spread between them tells you the deal’s true economics. The Uttir Rental Yield Calculator does all three in one pass, in your browser, with no upload.