Rental yield is a fundamental metric for property investors, but many calculate it incorrectly or use it in isolation without understanding its limitations.
Gross yield is simple: annual rent divided by purchase price, expressed as a percentage. A property renting for $500/week ($26,000/year) purchased for $650,000 has a gross yield of 4%. But gross yield ignores costs.
Net yield accounts for expenses: rates, insurance, management fees, maintenance, strata levies, and vacancy allowance. The same property might have a net yield of only 2.5-3% after expenses. This is the number that actually matters for cash flow planning. We always calculate net yield for our investor clients, including realistic vacancy and maintenance allowances, to ensure the investment genuinely stacks up.