Rental Yield
The annual rental income from a property expressed as a percentage of its purchase price or current market value.
Rental yield measures the income return of a real estate investment, similar to dividend yield for stocks. Gross rental yield is simply annual rent divided by property value. Net rental yield subtracts operating expenses (maintenance, insurance, property tax, vacancy, management fees) and is more meaningful for investment decisions. Good rental yields typically range from 4%–8% depending on the market — urban cores often have lower yields but higher appreciation, while suburban or secondary markets offer higher yields but slower growth. Rental yield alone doesn't capture total return — you must also consider property appreciation, tax benefits, and leverage effects.
Example
Property value: $250,000. Monthly rent: $1,800. Gross yield: ($1,800 × 12) / $250,000 = 8.6%. After $6,000/year in expenses, net yield: ($21,600 − $6,000) / $250,000 = 6.2%.
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Related terms
Mortgage
A long-term loan secured by real property, used to finance the purchase of a home or investment property, typically repaid over 15–30 years.
LTV (Loan-to-Value Ratio)
The ratio of the loan amount to the appraised value of the property, expressed as a percentage. Lower LTV means less risk for the lender.
Net Worth
The total value of all your assets (cash, investments, property) minus all liabilities (loans, mortgages, credit card debt).
Asset Allocation
The strategy of dividing investments among different asset classes — stocks, bonds, real estate, cash — to balance risk and return according to your goals and risk tolerance.