Analyze real estate profitability, cash flow, and Return on Investment (ROI).
Rental Yield is the financial metric real estate investors use to measure the profitability of an income-generating property. It represents the percentage of return you get on the property's purchase price through rental income.
Gross Yield is simply your total annual rent divided by the property price. While useful for a quick glance, it is misleading because it ignores costs.
Net Yield is your true Return on Investment (ROI). It subtracts all your annual operating expenses (like property management fees, maintenance, insurance, and taxes) from your rental income before dividing by the purchase price. This tells you exactly how hard your money is actually working for you.
While it varies heavily by location and interest rates, a Net Rental Yield between 5% and 8% is generally considered a strong investment in residential real estate. Anything lower means the cash flow might not be enough to cover unexpected emergency repairs.