Two ways to use it
- Rent needed: you know the price. How much rent does it need to hit your target yield?
- Maximum price: you know the rent. What is the most you can pay and still hit your target?
Choose gross yield for quick comparisons with benchmarks, or net yield to allow for vacancy, management and running costs. Not sure which? See gross vs net rental yield.
The formulas
Rent needed (gross) = target yield x price / 52
Maximum price (gross) = weekly rent x 52 / target yield
Rent needed (net) = (target yield x price + running costs) / (rent weeks after vacancy x (1 – management %))
Maximum price (net) = net income / target yield
Worked examples
| Question | Answer |
|---|---|
| Rent needed for a 5% gross yield on a $650,000 property | $625 a week |
| Rent needed for a 4% net yield on the same property | $673 a week |
| Maximum price for a 5% gross yield at $600 a week | $624,000 |
| Maximum price for a 4% net yield at $600 a week | $565,000 |
Net examples assume 2 weeks’ vacancy, 7% management and $5,300 a year in other running costs.
Using it when you make an offer
Set your target yield before you inspect. If the asking price is above the maximum price for your target, you know your walk-away number, or how much rent the property would need to justify it. Check the rent against comparables with our guide to estimating rent.
Frequently asked questions
How do I work out the rent needed for a yield?
Multiply your target gross yield by the price and divide by 52. For a 5% yield on $650,000, that is $625 a week.
How much should I pay for a rental property?
For yield alone, divide annual rent by your target yield. Growth prospects, condition and location also matter, so treat this as one input to your offer.
Should I target gross or net yield?
Gross yield is quicker and matches published benchmarks. Net yield is more realistic because it allows for costs.
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.