Rental Yield

Gross rental yield is annual rent divided by property value, expressed as a percentage. It is a fast screening number and a poor decision number, because it ignores every cost of actually owning and operating the property.

Net yield is the figure that matters. It subtracts property taxes, insurance, maintenance and repairs, a vacancy allowance, management fees if you are not self-managing, and any HOA or service charges. Together these routinely consume a large fraction of gross rent — often something in the range of a third to a half — so a headline gross yield can look attractive while the net position is thin or negative once financing is added.

The vacancy allowance is the line most often omitted, and omitting it assumes a tenant every single day of the year with no turnover gap and no non-payment. Maintenance is the second: it is lumpy rather than smooth, and a year with no major work is followed eventually by a roof or a boiler. Reserving for both is what separates a projection from a guess.

The "1% rule" — monthly rent at 1% of purchase price — circulates as a screening heuristic. It comes from a materially lower interest-rate environment, and in higher-priced markets it rarely clears at all. Treat it as a first filter, never as underwriting.

Yield is also only half the return. Total return combines rental yield with capital appreciation, and the two tend to trade off: higher-priced markets frequently show compressed yields alongside stronger appreciation, while lower-priced markets often produce stronger cash flow with slower price growth. Which you want depends on whether you need income now or growth later. Everything runs in your browser — no login, no upload, and no figure you enter leaves the page.