Rental yield calculator: how to measure a property investment
Rental yield compares the income a property produces with what it costs to buy. Gross yield is yearly rent divided by the purchase price. Net yield is more realistic because it deducts operating costs and vacancy and includes buying costs such as transfer tax, notary and agent fees.
What to include in costs
Typical yearly costs are maintenance, building insurance, property tax, management fees and community charges. Vacancy matters too: a property empty for one month a year loses about 8% of its rent. Be conservative with your estimates.
Using yield to compare properties
Yield helps compare properties in different cities or countries, but it ignores price growth, financing and income tax. Combine it with a mortgage calculation and local tax rules before you decide to buy.