Learn how to calculate the net rental yield, gross rental yield and capital gains for your investment property.
When you’re deciding if a property is a good investment, it’s important to look at two things: rental yield (the income it generates) and capital gains (how much it grows in value). Together, they give you the full picture of the potential return on your investment.
Rental yield is a way to measure how much income (rent) a property earns each year compared to its value. It’s one of the most common tools property investors use to work out whether a rental is likely to be profitable.
There are two main types:
Gross yield gives a quick estimate of returns before expenses.
Formula:
Gross yield = Annual rental income ÷ Property value × 100
For example:
Gross rental yield ignores expenses like rates, insurance, maintenance, or management fees.
Net yield factors in expenses, giving a clearer picture of your actual cashflow.
Net yield = (Annual rental income – Annual expenses) ÷ Property value x 100
Rental yield shows the income return from a property — similar to interest on a savings account. It helps you compare properties and see how they stack up against other investments. Rental yield tells you about cashflow and impacts whether you can afford to 'hold' onto the property.
But yield is only part of the story. The other key factor is capital gains.
A capital gain is the profit you make when your property’s value rises compared to what you paid.
Capital Gain = Selling Price − Purchase Price
For Example:
When assessing an investment property, look at both:
Together, they provide the complete return on your property investment.
Read next: Benefits of building new for an investment property.
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