Rental Yield Explained
Gross vs net rental yield explained with a worked $650k example, plus the yield vs growth trade-off.
Rental yield is a property's yearly rent as a percentage of its price — one number that lets you compare a $400,000 unit in Adelaide with an $850,000 house in Brisbane on the same scale.
It comes in two flavours: gross and net. Agents quote gross because it's bigger; your bank account experiences net. Knowing the difference is the cheapest edge you'll get as an investor.
Gross yield: the brochure number
Gross yield is one year of rent, divided by the purchase price, times 100. No costs, no fine print.
A $650,000 property renting for $550 a week collects $28,600 a year ($550 times 52). Divide by $650,000 and you get roughly 4.4% gross yield.
It's useful for a first pass — you can rank twenty listings in five minutes. Just don't confuse it with what you'll pocket, because it assumes the property runs itself for free.
Net yield: the number your bank account recognises
Net yield subtracts the running costs first — council rates, insurance, property management fees, maintenance, strata levies if it's an apartment (the fees owners pay to maintain shared areas like lifts and gardens). What's left, divided by the price, is your net yield.
On the same $650,000 property, say yearly costs come to $9,000 — an ordinary figure once rates, insurance, an agent and a couple of repairs are counted. Rent of $28,600 minus $9,000 leaves $19,600, and divided by $650,000 that's about 3% net — well below the 4.4% on the brochure.
That gap is normal. Net usually lands one to one-and-a-half percentage points under gross for a house, and further under for apartments thanks to strata levies.
🧮Reality check
Same property, two yields: 4.4% gross, roughly 3% net. If a listing only quotes gross, assume the real number is meaningfully lower — and do the subtraction yourself.
Why net is the honest number
Gross yield tells you what the rent would earn if owning property were free. Net yield answers the question you actually care about: how hard is your money working.
Net also exposes traps gross hides. Two apartments can both show 5% gross, but if one carries $6,000 a year in strata levies and the other $2,000, they're very different investments.
Neither yield includes your loan interest. Yield measures the property; interest measures how you financed it. Keep them separate.
The yield vs growth tug-of-war
High-yield properties tend to have slower capital growth (the rise in the property's value over time), and fast-growing properties tend to have skinny yields. Regional towns often rent hard but appreciate gently; inner-city houses do the reverse. You're choosing a spot on that see-saw, not escaping it.
Neither end is 'correct'. High yield means income now — handy if cash flow is tight. High growth means wealth later — if you can comfortably feed the property in the meantime.
Use gross yield to shortlist, net yield to decide, and be honest about which end suits your income and patience.
💡Quick win
Before any inspection, calculate the net yield yourself: yearly rent, minus rates, insurance, management and a maintenance allowance, divided by the full purchase price including stamp duty. It takes five minutes.
FAQ
What's a good rental yield in Australia?
As a rough compass, gross yields around 3-4% are common for capital-city houses, with units and regional properties often higher. The more useful number is net yield — rent minus running costs — because that's the return you actually receive.
Does rental yield include my mortgage repayments?
No. Yield measures the property's income against its price, ignoring how you paid for it. Loan interest belongs in your cash flow calculation — that's where you find out whether the property feeds you money each month or eats it.
Should I buy for yield or for capital growth?
There's no universal answer. High yield gives you income now, high growth builds wealth later, and they rarely come together in one property. The right mix depends on whether your budget can carry a property that costs money to hold while you wait for growth.
Run your own numbers
Sources: figures checked against ATO published rates and thresholds for FY2025-26 at the review date. See how we check our numbers.
⚠️ General information only — not tax or financial advice. Figures relate to FY2025-26 unless stated otherwise.