Rental yield tells you how hard your property is working as an income investment — the annual rent as a percentage of what the property is worth. This guide shows how to calculate both gross and net yield the Australian way, with worked examples, and explains why yield and cash flow are not the same thing.
Rental yield is the annual rental income a property generates, expressed as a percentage of the property's value or purchase price. It lets you compare very different properties on a level footing — a $400,000 unit and an $900,000 house — and compare property against other investments like shares or a term deposit.
There are two versions, and the gap between them is where most beginner mistakes happen: gross yield (before costs) and net yield (after costs). Both are useful, but they answer different questions. Our rental property calculator works out both for you.
Gross yield is the headline figure you see in listings and agent pitches. It ignores costs entirely.
Gross yield (%) = (Weekly rent × 52) ÷ Property value × 100
Take a house worth $650,000 rented at $520 per week. The annual rent is $520 × 52 = $27,040. The gross yield is $27,040 ÷ $650,000 × 100 = 4.16%.
Gross yield is quick and handy for a first filter, but it flatters every property equally by pretending ownership is free. It isn't.
Net yield subtracts the real costs of holding the property — everything except the mortgage principal and interest, which are treated separately because they depend on how much you borrowed rather than the property itself.
Net yield (%) = (Annual rent − Annual costs) ÷ Property value × 100
The costs that belong here include council rates, water rates, landlord insurance, property management fees (commonly around 6–8% of rent), strata or body corporate fees for units, repairs and maintenance, and any periods the property sits vacant.
Say those costs come to $8,500 a year on our $650,000 house. Net yield is ($27,040 − $8,500) ÷ $650,000 × 100 = 2.85% — considerably lower than the 4.16% gross figure. That gap is exactly why relying on gross yield alone leads to nasty surprises.
There is no single "good" figure, because yield trades off against capital growth and varies enormously by location and property type. As a rough guide to how the market tends to look:
A high yield is not automatically better. A property yielding 6% that never grows in value can underperform one yielding 3% that doubles over a decade. Yield and growth are two levers, and most strategies lean toward one or the other.
This is the point that catches people out: a property can have a healthy yield and still cost you money every week. Yield ignores your mortgage; cash flow doesn't.
Return to our $650,000 house at $520/week, and suppose you borrowed $520,000 at 6.2%. The interest alone is about $32,240 a year. Add the $8,500 of other costs and your total annual outgoings are around $40,740 — against $27,040 of rent. That is a pre-tax shortfall of roughly $13,700 a year, even though the property has a perfectly respectable 4.16% gross yield.
That shortfall is what negative gearing refers to: the property runs at a loss, which may be deductible against your other income. Yield tells you how the property performs as an asset; cash flow tells you what it does to your bank account. You need both, and our rental property calculator shows yield and cash flow side by side.
The classic Australian decision is house versus unit, and yield sits at the heart of it. Houses typically deliver lower yields but stronger land-value growth, since you own the land the house sits on and land is what appreciates. Units typically deliver higher yields but softer growth, and carry strata fees that eat into the net figure.
Neither is universally right. A higher-yielding unit eases the weekly cash-flow strain, which suits an investor who needs the numbers to stack up now. A lower-yielding house leans on long-term growth, which suits an investor who can carry the holding cost and wants the land. Run the net yield and the cash flow on each before deciding.
How do I calculate rental yield?
For gross yield, multiply the weekly rent by 52, divide by the property value, and multiply by 100. For example, $520 a week on a $650,000 property is $27,040 ÷ $650,000 × 100 = 4.16 per cent. Net yield subtracts annual holding costs before dividing.
What is the difference between gross and net rental yield?
Gross yield uses rent and property value only, ignoring costs. Net yield subtracts holding costs such as rates, insurance, management fees, strata and maintenance, so it is a truer picture. Net yield is always lower than gross, sometimes by more than a full percentage point.
What is a good rental yield in Australia?
It depends on property type and location. Capital-city houses often yield 2.5 to 3.5 per cent with stronger growth, units commonly 4 to 5.5 per cent, and regional properties sometimes above 6 per cent with slower growth. A high yield is not automatically better once you weigh capital growth.
Can a property have good yield but still cost me money?
Yes. Yield ignores your mortgage. A property with a healthy 4 per cent gross yield can still run at a weekly loss once mortgage interest and costs are counted — that shortfall is what negative gearing describes. Always check cash flow alongside yield.
Should I include the mortgage in the yield calculation?
No. Yield measures the property's performance independent of how you financed it, so it excludes the mortgage. To see what the property does to your bank account, calculate cash flow separately, which does include loan repayments.
Do houses or units have higher rental yields?
Units usually have higher yields because they cost less relative to the rent they earn, but they carry strata fees and typically weaker capital growth. Houses usually have lower yields but stronger land-value growth over time. Run the net yield on each before deciding.