Net Yield
Also known as: net rental yield, post-expense yield
Rental yield after subtracting operating expenses. A more realistic measure of what the property returns in practice.
Net yield is gross yield minus operating expenses, expressed as a percentage of the property's price. It's the more honest number for an investor because it reflects what the property actually returns after the bills are paid.
Operating expenses that reduce gross yield to net yield typically include: council rates ($1,200-$2,500 per year), building insurance ($1,200-$2,000 per year), landlord insurance ($300-$600 per year), property management (5.8-8.7% of rent), maintenance allowance (1-2% of property value per year), water rates, and for units, strata/body corporate fees ($2,000-$8,000 per year). Mortgage interest is not included; that's modelled separately as part of cashflow analysis.
Net yield in Australia typically runs 1.5 to 2.5 percentage points below gross yield. A 5% gross yield is often a 3-3.5% net yield. For units with high strata, the gap can be wider. Net yield is what should be compared to the cost of finance when assessing whether a property will be cash-flow positive.
Related terms
Gross Yield
Rental income divided by property price, before any expenses. The quickest (but crudest) measure of a property's cash return.
Rental Yield
The annual rental income from a property expressed as a percentage of its purchase price. The fastest way to gauge whether a property will cover its own costs.
Cashflow
The net cash a property generates or consumes after all income and expenses: the working-capital truth of an investment.
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Suburbs and properties on PropRadar are analysed using the metrics in this glossary.
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