Rental Yield Calculator

Use this rental yield calculator to discover how much your investment property is forecast to earn.

Rental Yield Calculator

The Calculator

This rental yield calculator breaks down both the gross yield and an assumed net yield after financing costs. The calculator is based on a few assumption, which we'll outline below.

What The Outputs Mean

What the Outputs of the Rental Yield Calculator Mean

Gross Yield

The first is the Gross Yield of your investment property, which is the annual rent your property generates as a proportion of the property's purchase price/value.

The good thing about gross yields is that they're easy to calculate. That's why you'll often see gross rental yields mentioned and reported on in the media. However, for an individual property investor looking at a particular investment, they are not very useful.

That's because a property can have a very high gross yield, but could actually cost you money each week if its costs are too high. An example of this might be if you invested in a run-down property that has high maintenance costs, or was structured on a principal and interest loan.

Gross yields are calculated by taking the rent your property is expected to achieve each week, multiplying it by 52 to get the potential annual rent, and then dividing that figure by the purchase price or value of your property.

Because of the above limitations, it makes sense to pay more attention to the net yield a property generates when considering an individual property purchase.

Net Yield

The Net Yield your investment property generates is based on the actual rent your property achieves, minus the annual operating expenses and then divided by the purchase price.

The raises the question of – "what counts as an operating expense?" These are everything it costs to run the property, like rates, insurance, property management and maintenance, but excluding the financing costs of your mortgage.

This figure is much more useful when comparing properties because while your finance costs will be very similar, your operating expenses can vary widely between properties.

Other Results From the Calculator

The other factors that come out of the calculator are:

  • Annual Rent – The weekly rent x (52- vacancy).
  • Annual Expenses – The estimated total costs of owning the property in the first year. These expenses include: the cost of the mortgage (interest-only), rates, insurance, accounting, professional property management and maintenance.
  • Annual Cashflow – The annual rent - annual expenses. It's the cash you would either receive or need to invest in owning the property.
  • Weekly Cashflow – The annual cashflow divided by 52.
What The Inputs Mean

What Goes Into the Rental Yield Calculator?

There are a couple of different inputs that go into the rental yield calculator:

  • Purchase Price – What you would pay to buy the property
  • Rent per Week – What you would charge the tenant per week to live in the property

The above two factors are all that is needed to calculate the gross yield of an investment property. The other factors, mentioned below, are used to create an assumed net yield.

  • Cash Deposit The amount of cash/savings that are used to purchase the property
  • Interest Rate – The cost the banks will charge you for lending you the money to secure the property.
  • Vacancy – The assumed number of weeks per year the property won't have a tenant.

Assumptions of the Rental Yield Calculator

Assumptions have been used to make this rental yield calculator as simple to use as possible. These assumptions derive from how we recommend property investors set up and manage their investments. The assumptions are:

  • That if no cash deposit is used the property will be bought with 100% lending
  • That the investment will be on an interest-only loan. The effect of this is that the mortgage repayments will be lower than if you were using a standard table loan/principal and interest loan
  • That there will be $3500 worth of set up costs when purchasing the property. This would usually be $2250 in legal fees, $750 in ordering a valuation and $500 in accounting set up
  • That insurance will cost 0.3% of the property's purchase price in the first year
  • That council rates will be 0.48% of the property's purchase price in the first year
  • That a professional property manager will be used and will charge 7%+gst (8.05%) to manage the property
  • That maintenance will cost $500 in the first year
  • That a professional account will be used and will charge $750+gst in the first year
Other Calculators

Other Calculators to Check Out If You Are Investing In Property

If you're considering investing in property, then it's likely that you'll want to run a whole heap of different numbers. That's why, here at Opes, we've created a range of different property investment calculators you can use to check whether it makes sense for you to invest.

On the other hand, if you're at the stage where you are determining whether you can invest in property, then you should take a look at our Equity and Leverage Calculator. This calculator will give you a sense about the maximum amount you could borrow based on your equity position.

Finally, if servicing (income) is holding you back from getting a mortgage, then you might consider decreasing your mortgage payments to increase your bank recognised income. That's why if that's you, you might like to check out the mortgage calculator, where you can change your term to see how much you could save from the bank's perspective.