Rental Yield: Gross vs Net Calculation
ADS Team
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August 20, 2026
22 days ago
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In short: Gross yield is annual rent divided by property value. Net yield subtracts the costs of holding the property - rates, insurance, management, maintenance and strata - which typically consume 20-30% of gross rent. A 4.5% gross yield is commonly closer to 3.2% net before any loan interest.
Key takeaways
- Gross yield ignores every cost of ownership.
- Holding costs typically run 20-30% of gross rent, more for strata.
- Net yield still excludes loan interest - that is cash flow, not yield.
- High yield often signals lower expected capital growth.
The two calculations
On a $650,000 property renting at $560 a week ($29,120 a year):
| Item | Amount |
|---|---|
| Gross rent | $29,120 |
| Gross yield | 4.48% |
| Council and water rates | -$3,200 |
| Insurance | -$1,400 |
| Management (7%) | -$2,038 |
| Maintenance allowance | -$1,500 |
| Net income | $20,982 |
| Net yield | 3.23% |
What net yield still excludes
Loan interest. At 6.5% on a $520,000 loan that is $33,800 a year against $20,982 of net income - a shortfall of about $12,800 before tax.
Yield measures the property's return; cash flow measures your position after funding it. Confusing the two is how investors are surprised by the monthly reality.
Yield versus growth
Higher-yield markets typically show lower capital growth, and vice versa. Regional and outer-suburban properties often yield more; inner-city and established suburbs usually yield less and grow more.
Neither is inherently better - they suit different objectives and different tax positions.
Frequently asked questions
What is a good rental yield in Australia?
It depends entirely on the market. Metropolitan houses commonly sit in the 2.5-4% gross range; units and regional properties often higher. Compare within a market, not across them.
Should I include vacancy in the calculation?
Yes - assuming 52 weeks of rent is optimistic. Allowing two to four weeks a year is more realistic and is what lenders effectively do when they shade rent.
Does depreciation affect yield?
Not the yield calculation, but it affects your after-tax position significantly. A quantity surveyor's depreciation schedule is usually worth its cost on a newer property.
Related reading
- Investment Property Loans: What Is Different
- Rentvesting: Buying Where You Can Afford, Living Where You Want
- Interest-Only to P&I: Modelling the Payment Jump
Sources
- Rental properties guide — Australian Taxation Office
- Investing in property — ASIC Moneysmart
Information current as at 2 September 2026.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
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