Rental yield is the annual rent a property generates as a percentage of its value. It is one of the first numbers investors look at — and one of the most misunderstood.
Gross vs net yield
Gross yield is annual rent divided by property value. Net yield subtracts holding costs — rates, insurance, management, maintenance — giving a truer picture of cash return. A 5% gross yield can become a very different net figure.
- Gross yield = (weekly rent × 52) ÷ property value
- Net yield also deducts all holding costs
- Higher-yield doesn’t always mean better total return
Yield vs growth
High-yield markets often have lower capital growth, and vice versa. The right balance depends on your goals: cash flow now, or wealth over time. Most long-term wealth is built through capital growth, with yield keeping the holding cost manageable.
The point is not to chase the highest yield, but to understand how yield, growth and your borrowing capacity work together — which is where a tailored strategy earns its keep.
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