Investment Property Rental Yield Calculators

(last updated 1/04/2014)

Understanding Rental Yield can be helpful in researching the purchase of an investment property.

Using our online Negative Gearing Tax Calculator, investors can also quickly obtain an estimate of the "out-of-pocket" cost of owning an investment property.

 Rental Property Yield:

A gross rent yield of between 5.5% and 6.5% would be considered good. Below that I would be looking for a good reason to purchase the property. Other considerations can include location or potential growth that may deserve more consideration than yield alone.

Calculating the rental yield for a prospective investment property is fairly simple. There are a couple of different scenarios that can be used in arriving at rental yields:

Gross rental yield:

Weekly rent amount: $330 ($17160 per annum)
Purchase price: $284000

Gross Rental Yield ==> 17160 / 284000 = .06 or 6%.

Gross rental yield and tax benefits:

A variation on this formula could include taxation benefits, which will account for deductions that can vary between properties - for example, a new property would have substantially more depreciation than an older property and tax rates can vary between different property investors.

Assuming large depreciation claim:
Weekly rent amount: $400 ($20800 per annum)
Tax Savings $8000 (assuming big depreciation claims)
Purchase price: $440000

Gross Rental Yield ==> (20800+8000 / 440000 = .065 or 6.5%.

Assuming small depreciation claim:
Weekly rent amount: $330 ($17160 per annam)
Tax savings $3000 (assuming small depreciation claim)
Purchase price: $284000

Gross Rental Yield ==> (17160+3000) / 284000 = .07 or 7%.

Cash-on-cash Rental Yield:

Monthly Rental Amount $2,400.00
Percent of Year Unoccupied 5%
Take out for Vacancy for Annual Cash In of $27,360.00

Property Acquisition Cost $300,000.00
Less Down Payment - Cash In $60,000.00
Amount of the loan $240,000.00

Payment Monthly Principal/Interest $1,556.64
Annual Insurance Cost $1,200.00
Annual Taxes $1,400.00
Annual Repairs Budget $600.00
Percent of Rent Mgmt Fee of 6%
These expenses total to Annual Cash Out of $23,521.28

Income of $27,360 minus cost of $23,521 = $3839 cash return over cash out

$3839 divided by cash investment of $60,000 = Cash-on-cash Rental Yield of 6.4%

Rental yields can be very helpful in comparing different purchasing options. You can also include other variations such as occupancy rates etc.

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