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Net Rental Yield Formula:
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Net Rental Yield is the annual rental income generated from a property after subtracting expenses, expressed as a percentage of the property's cost. It provides investors with a clear picture of the return on their real estate investment.
The calculator uses the Net Rental Yield formula:
Where:
Explanation: The formula calculates the net return on investment by subtracting expenses from rental income, then expressing this as a percentage of the property value.
Details: Net Rental Yield is a crucial metric for real estate investors to evaluate the profitability of rental properties, compare different investment opportunities, and make informed decisions about property acquisitions and management.
Tips: Enter annual rental income and expenses in dollars, and property value in dollars. All values must be valid (property value > 0).
Q1: What is considered a good net rental yield?
A: Generally, a net rental yield of 5-8% is considered good, though this varies by location and property type. Higher yields indicate better investment returns.
Q2: What expenses should be included in annual expenses?
A: Include property taxes, insurance, maintenance costs, property management fees, vacancy allowances, and any other ongoing operational expenses.
Q3: How does net rental yield differ from gross rental yield?
A: Gross rental yield doesn't account for expenses, while net rental yield provides a more accurate picture by subtracting all annual expenses from rental income.
Q4: Should mortgage payments be included in expenses?
A: Typically, only interest portion of mortgage payments is included as an expense, not the principal repayment, as principal repayment builds equity.
Q5: How often should I calculate net rental yield?
A: It's recommended to calculate net rental yield annually, or whenever there are significant changes in rental income, expenses, or property value.