The best way to understand rental yield is to see it calculated on real-looking properties. Below are five typical Australian scenarios, each worked through for gross yield, net yield and weekly cash flow after interest.
All five use the same method as our calculator, set out on the methodology page. The figures are illustrative, not quotes for any particular suburb.
Key takeaways
- The highest gross yield is not always the highest net yield. Strata, vacancy and management fees reshuffle the order.
- At a 7% interest rate with an 80% loan, all five properties need a weekly top-up from the owner.
- The dual-income property delivers the best net yield. The regional house has the smallest weekly shortfall.
The five scenarios at a glance
Assumptions for cash flow: 80% loan, 7% interest-only, close to the current average investor rate.
| Property | Price | Rent/wk | Gross yield | Net yield | Cash flow/wk |
|---|---|---|---|---|---|
| Inner-city unit | $520,000 | $550 | 5.50% | 3.34% | -$226 |
| Regional house | $420,000 | $480 | 5.94% | 3.75% | -$150 |
| Suburban house | $650,000 | $600 | 4.80% | 3.48% | -$265 |
| Premium house | $1,400,000 | $900 | 3.34% | 2.27% | -$896 |
| House plus granny flat | $820,000 | $900 | 5.71% | 4.14% | -$230 |
1. Inner-city unit
A two-bedroom unit priced at $520,000, renting for $550 a week, with $4,500 a year in strata levies.
- Annual rent: $550 x 52 = $28,600
- Gross yield: $28,600 / $520,000 = 5.50%
- Costs: vacancy 2 weeks $1,100, rates $1,600, water $700, insurance $600, strata $4,500, management 7% $1,925, maintenance $800. Total $11,225
- Net income: $28,600 – $11,225 = $17,375
- Net yield: $17,375 / $520,000 = 3.34%
- Interest on a $416,000 loan at 7%: $29,120. Cash flow: -$11,745 a year, or -$226 a week
Lesson: the strong gross yield drops by more than 2 points once strata is counted. Landlord insurance is cheaper for units because building cover sits with the strata scheme, but it does not come close to offsetting the levies. More in units vs houses.
2. Regional house
A three-bedroom house in a regional centre, priced at $420,000 and renting for $480 a week. We allow 3 weeks’ vacancy and an 8% management fee, both a little higher than in the city.
- Annual rent: $24,960
- Gross yield: 5.94%
- Costs: vacancy $1,440, rates $2,000, water $800, insurance $1,600, management $1,882, maintenance $1,500. Total $9,222
- Net income: $15,738. Net yield: 3.75%
- Interest on $336,000 at 7%: $23,520. Cash flow: -$150 a week
Lesson: the highest gross yield of the five, and the smallest weekly shortfall. The trade-off is usually slower capital growth and more sensitivity to the local economy. See rental yield vs capital growth.
3. Suburban house
The example loaded in our calculator: $650,000, renting for $600 a week.
- Annual rent: $31,200. Gross yield: 4.80%
- Costs: vacancy $1,200, rates $2,000, water $800, insurance $1,500, management $2,100, maintenance $1,000. Total $8,600
- Net income: $22,600. Net yield: 3.48%
- Interest on $520,000 at 7%: $36,400. Cash flow: -$265 a week
Lesson: a gross yield above the national average still means a weekly top-up at a 7% interest rate. What counts as a good yield depends on whether you can carry that.
4. Premium house
A $1,400,000 house in a sought-after suburb, renting for $900 a week. At this price, land tax of $2,000 a year is included.
- Annual rent: $46,800. Gross yield: 3.34%
- Costs: vacancy $1,800, rates $2,800, water $1,000, insurance $2,200, management 6% $2,700, maintenance $2,500, land tax $2,000. Total $15,000
- Net income: $31,800. Net yield: 2.27%
- Interest on $1,120,000 at 7%: $78,400. Cash flow: -$896 a week
Lesson: this is a growth play. The owner is paying about $46,600 a year to hold the property and needs strong capital growth to come out ahead.
5. House plus granny flat
An $820,000 house with a self-contained granny flat. The house rents for $520 a week and the flat for $380, a combined $900.
- Annual rent: $46,800. Gross yield: 5.71%
- Costs: vacancy $1,800, rates $2,400, water $1,100, insurance $2,400, management $3,150, maintenance $2,000. Total $12,850
- Net income: $33,950. Net yield: 4.14%
- Interest on $656,000 at 7%: $45,920. Cash flow: -$230 a week
Lesson: two incomes from one block deliver the best net yield here. Check council approvals, separate metering and insurance before counting on the second rent. More ideas in how to increase rental yield.
What the examples show
- Gross yield ranks properties differently from net yield. The unit beats the suburban house on gross yield but trails it on net.
- Costs vary more than people expect. Vacancy and running costs took between 28% and 39% of the rent across these five.
- Financing changes everything. Every property here would be cash flow positive with no loan. At 7% interest on an 80% loan, none are.
To go beyond yield, for example to measure return on the cash you put in, see property investment metrics explained. For the formulas on their own, see gross vs net rental yield. To add tax and depreciation, use the rental cash flow calculator. Example 5 can be modelled in detail with the granny flat calculator.
Try your own scenario
Plug in a property you are looking at and compare it with these examples.
Frequently asked questions
How do you calculate rental yield step by step?
Multiply weekly rent by 52 for annual rent. Divide by the property price and multiply by 100 for gross yield. For net yield, subtract vacancy and running costs from annual rent before dividing.
What costs should I include in a rental yield calculation?
Vacancy, property management and leasing fees, council and water rates, landlord insurance, strata levies, maintenance and land tax. Leave out loan interest, which belongs in cash flow.
Why is my cash flow negative when my yield looks good?
Yield ignores your loan. If annual interest is more than the property’s net income, cash flow is negative even with a solid yield.
See what this property would yield
Enter the price, rent and costs to get gross yield, net yield and weekly cash flow.
General information only. This calculator and content do not consider your personal circumstances and are not financial, tax or legal advice. Speak to a licensed professional before making investment decisions.
