Rental Yield

Rental yield is a measure of the income return on a property investment. It expresses the annual rent collected as a percentage of the property's price or current market value. In Australia, yield is the single most quoted metric for investment properties because it gives an immediate answer to the question every investor asks first: how much rent does this generate, relative to what it costs?

There are two common forms. Gross rental yield divides annual rent by the purchase price with no deductions. It's quick and consistent, which is why most property websites publish it, but it ignores expenses, vacancy, and tax. Net rental yield subtracts operating costs (rates, insurance, maintenance, property management fees) before dividing by the price. Net yield is always lower than gross, typically by 1.5 to 2.5 percentage points in Australia.

Yield doesn't capture capital growth, which for long-term investors is typically the larger component of total return. It also doesn't account for interest costs, which are modelled separately in cashflow analysis. Use yield as a first-pass filter, not as the only number.