Rental yield is the number that tells you whether a property earns its keep. It's how you compare a $450,000 unit in regional Queensland to a $1.2M townhouse in Melbourne on a level playing field. And it takes about 30 seconds to calculate once you know the formula.
This guide walks you through gross yield, net yield, and the data inputs you need to run the calculation on any listing you're evaluating.
What Is Rental Yield?
Rental yield is the annual rental income a property generates, expressed as a percentage of its value. It's one of the core metrics property investors use to assess whether a deal stacks up financially.
There are two versions: gross yield and net yield. Gross gives you a quick comparison number. Net gives you the real picture after expenses.
How to Calculate Gross Rental Yield
Gross rental yield is the simplest version. It uses just two inputs: the annual rent and the property's purchase price.
The formula:
Worked example:
Say you're looking at a property listed at $700,000. Comparable rentals in the area are achieving $600 per week.
- Calculate annual rent: $600 × 52 = $31,200
- Divide by purchase price: $31,200 / $700,000 = 0.0446
- Multiply by 100: 4.46% gross yield
That's it. According to Canstar, this formula (weekly rent × 52, divided by purchase price) is the standard approach used across the Australian property industry.
Gross yield is useful for quickly filtering listings and comparing properties against each other. But it doesn't account for the costs of actually owning the property, which is where net yield comes in.
How to Calculate Net Rental Yield
Net rental yield strips out your annual holding costs to show what you actually keep.
The formula:
The expenses you need to include:
- Council rates
- Water rates
- Insurance (landlord cover)
- Property management fees (typically 5–10% of rent)
- Strata or body corporate fees (if applicable)
- Maintenance and repairs
- Vacancy allowance (the weeks per year the property sits empty between tenants)
Worked example:
Using the same $700,000 property at $600 per week rent:
- Annual rent: $600 × 52 = $31,200
- Estimated annual expenses:
- Council rates: $1,800
- Water rates: $1,000
- Insurance: $1,500
- Property management (7%): $2,184
- Maintenance: $2,000
- Vacancy (2 weeks): $1,200
- Total expenses: $9,684
- Net income: $31,200 − $9,684 = $21,516
- Net yield: $21,516 / $700,000 × 100 = 3.07% net yield
The gap between gross (4.46%) and net (3.07%) is significant. That 1.39 percentage point difference represents almost $10,000 a year in holding costs. This is why experienced investors never rely on gross yield alone.
What Counts as a “Good” Rental Yield?
There's no universal answer because it depends on interest rates, your borrowing costs, and your investment strategy.
Canstar notes that historically, a property generating a yield of 7% or above was considered high yield. As mortgage interest rates have fallen over the past decade, that threshold has dropped too. Their general benchmark: a yield of at least 2–3% above the average current variable mortgage rate is considered high yield.
For context, with the mean price of residential dwellings in Australia at $1,074,700 as of the December quarter 2025 (Australian Bureau of Statistics), even modest differences in yield percentage translate to tens of thousands of dollars annually.
As a rough guide for Australian investors in 2026:
- Under 3%: Low yield. Common in premium capital city markets where investors are banking on capital growth instead.
- 3–5%: Moderate yield. The range where most metropolitan properties sit.
- 5–7%+: High yield. More common in regional areas, often with higher vacancy risk.
The right yield depends on your strategy. Growth-focused investors accept lower yields in exchange for long-term price appreciation. Cash flow investors target higher yields to cover their mortgage and generate income from day one.
Where to Find the Data Inputs
Running the formula is easy. Getting accurate inputs is the hard part. Here's where to look:
Purchase price: The listing price gives you a starting point, but check recent comparable sales on Domain or realestate.com.au for what similar properties actually sold for. The sold price is what goes into your formula, not the asking price.
Weekly rent: Search rental listings in the same suburb for comparable properties (similar size, condition, and features). You can also check the property manager's estimate if one is provided in the listing.
Expenses: Council and water rates are usually disclosed in the listing or available from the local council website. Insurance quotes take five minutes online. Property management fees are typically quoted as a percentage of collected rent. For strata fees, check the strata report or ask the selling agent.
Vacancy rates: Your local real estate institute or data providers like SQM Research publish vacancy rate data by suburb. A suburb with a 1% vacancy rate is very different from one sitting at 4%.
Common Mistakes When Calculating Yield
Using the asking price instead of the total acquisition cost. Stamp duty, legal fees, building and pest inspections, and loan establishment fees all add to your effective purchase price. For a more accurate net yield, use the total cost of acquisition as your denominator.
Ignoring vacancy. No property is rented 52 weeks a year, every year. Even in tight rental markets, you'll have turnover periods. Build in at least two weeks of vacancy per year as a baseline.
Confusing yield with total return. Yield only measures rental income against property value. It doesn't capture capital growth (or decline), tax benefits like depreciation and negative gearing deductions, or the compounding effect of paying down your mortgage with tenant income. Yield is one piece of the puzzle, not the whole picture.
Using advertised rent instead of achieved rent. What a property is listed for rent and what a tenant actually pays can differ. Check achieved rental data, not just listings.
Gross vs Net: Which Should You Use?
Use both, but at different stages.
Gross yield is your screening tool. When you're scanning 50 listings in a suburb, gross yield lets you quickly sort and compare without crunching detailed expense numbers for every property. It's the first filter.
Net yield is your decision tool. Once you've shortlisted two or three properties, net yield tells you what you'll actually earn after holding costs. Two properties with identical gross yields can look completely different once you factor in strata fees, higher council rates, or a suburb with elevated vacancy.
Running Yield on Real Listings
Here's a practical process for evaluating any property you find online:
- Note the listing price (or recent comparable sale price)
- Check comparable rental listings in the same suburb to estimate weekly rent
- Calculate gross yield: (weekly rent × 52) / purchase price × 100
- If it passes your gross yield threshold, dig into expenses
- Calculate net yield using actual or estimated holding costs
- Compare net yield against your borrowing rate to assess cash flow
If your net yield is above your mortgage interest rate, the property is positively geared before tax. If it's below, you're negatively geared, meaning you'll need to top up the shortfall from your own income each month.
Yield Is Just the Starting Point
Rental yield tells you how hard a property works from a cash flow perspective. It's essential, but it's one metric among several that determine whether an investment is worth making.
You also need to consider capital growth potential, the suburb's supply and demand dynamics, demographic trends, infrastructure spending, and how the property fits within your broader portfolio strategy.
PropSpotter's suburb research briefs pull from 30+ institutional data sources to cover all of these factors, including rental yields, vacancy rates, and growth modelling. If you want help evaluating properties with the same analytical depth used by institutional investors, book a free strategy call and see how the system works.