Rental yield
The rent a property earns each year expressed as a percentage of what it is worth.
Gross rental yield is annual rent divided by the property value. A $600,000 property renting for $600 a week collects $31,200 a year, which is a gross yield of 5.2%.
Net yield subtracts the costs of holding the property — rates, insurance, strata, management fees and maintenance — before dividing. It is always lower than gross, and it is the figure that actually tells you something useful.
Yield and capital growth usually pull in opposite directions. Inner-city blue-chip suburbs tend to offer low yields and strong growth; regional markets often reverse that. Choosing between them is choosing between income and appreciation.
Gross versus net on the same property
A $600,000 property renting at $600 a week has a 5.2% gross yield. Take out $9,000 of annual costs and the net yield falls to about 3.7% — a very different investment case.
The bit people get wrong
Agents quote gross yield because it is the bigger number. It ignores every cost of ownership and assumes the property is tenanted 52 weeks a year, neither of which reflects reality.
Common questions
What is a good rental yield in Australia?
Gross yields commonly sit between 3% and 5% in capital cities and can exceed 6% in regional areas. What counts as good depends on whether you are buying for income or for growth.
Should I use the purchase price or current value?
Use current market value to judge whether to keep holding, and purchase price to measure how the original decision performed. Both are valid for different questions.
Does yield account for vacancy?
Gross yield assumes full occupancy. A more honest calculation reduces annual rent by an expected vacancy allowance, often two to four weeks a year.
Run your own numbers