How to Calculate Rental Yield in Australia (Gross vs Net)
The gross and net rental yield formulas, every cost to include, and two worked examples showing how strata levies can wipe out a unit's yield advantage. With a free calculator.
Rental yield is the first number every investor checks and the one most often quoted wrong. Agents quote gross yield. Your bank account experiences net yield. On a typical Australian investment property the gap between the two is around 1.5 percentage points, which on a $650,000 house is roughly $10,000 a year.
Want to skip the maths? Use our free rental yield calculator. Read on to understand what each number means and where the traps are.
Gross rental yield
Gross yield = (weekly rent × 52) ÷ purchase price × 100
A $650,000 house renting for $600 a week earns $31,200 a year. Divide by $650,000 and you get a gross yield of 4.80%.
Gross yield is useful for one thing: comparing properties and postcodes quickly on the same basis. It is the figure PropPulse uses to rank postcodes in the Investment Score, because it can be calculated consistently for every postcode in the country.
Net rental yield
Net yield = (rent collected − annual costs) ÷ purchase price × 100
Net yield subtracts what it actually costs to own and rent out the property. It excludes mortgage interest, because yield measures the property, not your financing.
The costs to include
- Property management: 5.5% to 9% of rent plus GST, plus letting fees
- Council rates: $1,500 to $3,000 a year in most metro areas
- Water service charges: landlords pay the fixed charges in most states
- Insurance: landlord insurance, plus building insurance for houses
- Strata or body corporate: $2,000 to $8,000+ for units and apartments
- Land tax: depends on state and total landholdings
- Repairs and maintenance: budget 0.3% to 0.5% of value a year
- Vacancy: 2 weeks a year is a reasonable allowance in most metro markets
Two worked examples
$650,000 house at $600 a week
| Rent collected (50 weeks) | $30,000 |
| Property management (8%) | −$2,400 |
| Council rates | −$2,000 |
| Water service charges | −$800 |
| Insurance | −$1,800 |
| Repairs and maintenance | −$2,500 |
| Net rental income | $20,500 |
$550,000 apartment at $550 a week
| Rent collected (50 weeks) | $27,500 |
| Property management (8%) | −$2,200 |
| Council rates | −$1,500 |
| Water service charges | −$700 |
| Landlord insurance | −$600 |
| Strata levies | −$4,500 |
| Repairs and maintenance | −$1,000 |
| Net rental income | $17,000 |
What is a good rental yield?
- Capital city houses: 3% to 4.5% gross is typical
- Capital city units: 4% to 5.5% gross is typical
- Regional centres: 4.5% to 6% gross
- Mining and remote towns: 7%+ gross, with much higher risk
Higher yield usually means lower expected capital growth, and the reverse. Neither is better in the abstract. The right mix depends on your income, tax bracket and how long you plan to hold, which we cover in capital growth vs rental yield.
From yield to cash flow
Yield tells you how hard the property works. Cash flow tells you what it costs you. For the $650,000 house with an 80% loan at 6.5% interest-only, annual interest is $33,800. Against net rental income of $20,500, that is −$13,300 a year, or about −$256 a week before tax.
Tax deductions on that loss and on depreciation recover part of it. See our negative gearing guide and depreciation guide for how the after-tax figure works. If you want property that pays for itself from day one, read how to find cashflow-positive property.
Get the yield for any postcode
Every PropPulse report shows median rent, gross yield, net yield and estimated weekly cash flow for the postcode. Try the calculator with your own numbers, or get a free report.