Rental yield measures the annual rental income generated by an investment property as a percentage of its value. It is one of the most important metrics for comparing investment property performance across different markets and property types.
Gross rental yield = (Annual Rent ÷ Property Value) × 100
Example: A property worth $600,000 generating $580 per week in rent has a gross yield of (580 × 52 / 600,000) × 100 = 5.03%.
Net rental yield deducts all holding costs — property management fees (typically 7–10% of rent), council rates, insurance, maintenance, and vacancy allowance — from the annual rent before dividing by property value. Net yield is a more accurate measure of actual cash flow but requires a detailed expense model.
What is a good yield? In Australian capital cities:
– Sydney and Melbourne: gross yields of 3–4% are typical in established markets
– Brisbane and Adelaide: 4.5–5.5% gross is common in established and growth corridors
– Perth: 5–6.5% gross in active mining-driven demand periods
– Regional markets: 6–8%+ gross in some locations, with higher vacancy risk
A property with a gross yield above 5% in a capital city is generally considered strong. Net yield above 3.5% in a major city after all costs typically indicates the property is approaching or achieving positive cash flow.
Yield and capital growth tend to be inversely correlated — high-yield markets often have lower capital growth prospects, and vice versa.
