You can increase rental yield in two ways: earn more rent or spend less to hold the property. Since yield is rent divided by price, and the price is fixed once you have bought, every gain comes from those two levers. Here are twelve ways to pull them, roughly in order of effort.
Key takeaways
- Net yield is where most landlords leave money on the table. Costs are easier to control than rent.
- Upgrades only lift yield if the extra rent pays back the cost within a few years.
- Fewer vacant weeks often adds more than a rent increase.
- The biggest lever is at purchase. Yield is largely set the day you buy.
What a small change is worth
On a $650,000 property renting for $600 a week, a $40 a week increase lifts gross yield from 4.80% to 5.12% and net yield from 3.48% to 3.76%. After management fees and vacancy, that is about $1,860 a year more in net income. If an upgrade costing $8,000 earned that increase, it would pay for itself in a little over four years, before tax and depreciation.
Run your own before and after in the calculator.
Earn more rent
1. Price the rent right
Under-renting is the most common leak. Check comparable listings each time the lease is up, follow our steps to estimate rent, and ask your property manager for a written appraisal. Over-pricing is costly too: two extra vacant weeks can wipe out a year of a small increase.
2. Review rent at every allowed opportunity
Most states limit increases to once every 12 months, with set notice periods. Check your state’s tenancy rules and diarise the date. Small, regular increases in line with the market tend to keep good tenants better than occasional large jumps.
3. Add features tenants will pay for
Air conditioning, a dishwasher, secure parking, extra storage, fast internet and a fenced yard tend to attract more applicants or higher rent. Ask your property manager which features local tenants are asking for before spending.
4. Consider furnishing, selectively
Furnished properties can command higher rent near hospitals, universities and CBDs, where short-term professional tenants are common. Elsewhere, furniture can add cost, wear and vacancy without the rent to match.
5. Be open to pets
A large share of renters have pets, and pet-friendly listings attract more applicants. Rules on refusing pets differ by state, so check what applies to you. Landlord insurance and a sensible pet clause manage most of the risk.
6. Add a second income
A granny flat, dual-key layout or self-contained studio can lift gross yield significantly, as our worked example shows. Model your own with the granny flat calculator. Check council approvals, separate metering, insurance and the effect on land tax first. Renting by the room is another option in some areas, but it comes with extra compliance and management obligations. See the rooming house calculator.
Cut the cost of holding
7. Reduce vacancy
Every empty week costs about 2% of annual rent. See rental vacancy rates. Time lease expiries away from slow months such as the Christmas period, respond quickly to maintenance requests, and keep good tenants with fair, predictable increases.
8. Shop your landlord insurance every year
Premiums vary widely for similar cover. Compare at renewal, and check the policy covers loss of rent and malicious damage. See landlord insurance.
9. Negotiate the management fee
Property management fees are often negotiable, particularly if you have several properties or a long-term tenant. Compare the whole fee schedule, including leasing, inspection and admin fees, not just the headline percentage.
10. Check your rates and land valuation
Council rates and land tax are based on land values. If a valuation looks too high compared with similar properties, you may be able to object within the time allowed.
11. Maintain before things break
Planned maintenance is cheaper than emergency repairs, and well-kept properties lease faster and for more. Set aside a fixed amount each year rather than reacting.
Buy the yield in the first place
12. Buy with yield in mind
The single biggest factor is the price you pay relative to the rent the property can earn. Before buying, compare the property’s yield with benchmarks for its city, check houses against units, and look at net yield, not just gross. If you are buying for growth, accept the lower yield knowingly. See rental yield vs capital growth.
Mistakes that lower yield
- Over-capitalising on renovations tenants will not pay for
- Holding out for a top-of-market rent through weeks of vacancy
- Ignoring strata levy increases when buying a unit
- Forgetting land tax when buying a second or third property
Several common assumptions about yield are also wrong. See rental yield myths.
See what a change is worth
Change the rent or a cost in the calculator and watch your net yield and cash flow move.
Frequently asked questions
What is the fastest way to increase rental yield?
Set the rent correctly at the next lease renewal and cut avoidable costs such as overpriced insurance and management fees. Both can be done without spending money on the property.
Do renovations increase rental yield?
Only if the extra rent covers the cost within a reasonable time. Work out the payback period: renovation cost divided by extra annual net rent.
Does a granny flat increase rental yield?
Usually, because it adds a second rent for much less than the cost of a second property. Check approvals, insurance and tax implications first.
Can I raise the rent whenever I want?
No. Each state sets rules on how often rent can rise and how much notice you must give. In most states it is once every 12 months.
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.
