Rental yield calculator: gross yield, net yield and cash-on-cash return

Work out what a rental property returns on its price and on the cash you put in, from your own figures, in any country and any currency.

The result is an estimate from the numbers you enter. It is not investment advice, and it says nothing about whether the rent or the costs you enter are realistic.

How it is calculated

• You enter:
  • the purchase price;
  • the rent you expect, per month or per year;
  • your yearly running costs (for example maintenance, insurance, management, service charges, property taxes, and an allowance for months without a tenant);
  • your one-off purchase costs (for example taxes and fees on buying);
  • optionally, a mortgage: the loan amount, the annual interest rate and the term in years;
  • optionally, a currency. It changes only how amounts are written; nothing is converted.
• This page uses these definitions:
  • Gross yield = yearly rent / purchase price x 100.
  • Net yield = (yearly rent - yearly running costs) / (purchase price + purchase costs) x 100.
  • Cash-on-cash return = (yearly rent - yearly running costs - yearly mortgage payments) / cash you put in x 100. The cash you put in = purchase price - loan amount + purchase costs.
• The yearly mortgage payment is 12 x the monthly payment of a repayment mortgage, worked out as on our mortgage calculator: M = P x r(1 + r)^n / ((1 + r)^n - 1), with P the loan, r the annual rate / 12 / 100 and n the number of monthly payments. At a 0% rate, M = P / n. The monthly payment is rounded to the cent first; the yearly payment is 12 x that rounded figure. Without a mortgage, cash-on-cash return equals the net yield.
• Not included: income tax on the rent, changes in the property's value, rent or cost increases over time, and the part of each mortgage payment that repays the loan. The calculator counts the whole payment as cash going out.

These are formulas, stated as mathematics. Other sources may define net yield or cash-on-cash return differently, so compare like with like.

A worked example

A home bought for 300,000, let at 1,500 a month (18,000 a year), with 3,600 a year of running costs and 15,000 of purchase costs, and a loan of 225,000 at 5% a year over 25 years:

• Gross yield = 18,000 / 300,000 x 100 = 6.00%.
• Net yield = (18,000 - 3,600) / (300,000 + 15,000) x 100 = 4.57%.
• The monthly mortgage payment is 1,315.33, so 15,783.96 a year.
• Cash put in = 300,000 - 225,000 + 15,000 = 90,000.
• Cash-on-cash return = (18,000 - 3,600 - 15,783.96) / 90,000 x 100 = -1.54%.

A negative cash-on-cash return means that, in this example, the rent does not cover the running costs and the mortgage payments. The calculator shows such a result as it is, without rounding it to zero.

Questions

Which yield should I look at? Gross yield is the quickest comparison between properties. Net yield counts what the property costs to run and to buy. Cash-on-cash return counts your mortgage and shows the return on the money you put in yourself.

Why is my cash-on-cash return lower than my net yield? The mortgage payments come out of the rent, and this calculator counts the whole payment, interest and repayment. When the yearly payments are a larger share of the loan than the net yield, borrowing lowers the return on your cash, and it can turn it negative. In the example above the yearly payments are 7.02% of the loan (15,783.96 / 225,000), against a net yield of 4.57%.

Does the calculator know the rents or costs where I live? No. It uses only the figures you enter. It supplies no rents, costs or interest rates.

This calculator gives an estimate from your own figures. It is not investment or financial advice.