How To Calculate Rental Yield Like a Pro?
Whether you're a first-time investor or an experienced landlord, understanding rental yield is critical to making smart property decisions. In simple terms, rental yield tells you how much income you're earning from your property investment—relative to its cost.
But here’s the thing: not all rental yields are created equal. Let’s break it down and show you how to calculate it like a pro.
What Is Rental Yield?
Rental yield is the return you receive from renting out a property, usually expressed as a percentage of the property's purchase price or market value.
There are two types of rental yields to know:
Gross Rental Yield
Net Rental Yield
How to Calculate Gross Rental Yield
This is the most basic calculation and gives you a rough snapshot of the return before expenses.
Formula:
Gross Rental Yield (%) = (Annual Rental Income ÷ Property Price) x 100
Example:
Let’s say:
Purchase price = $1,000,000
Monthly rent = $3,500
Annual rent = $3,500 x 12 = $42,000
Then:
Gross Rental Yield = ($42,000 ÷ $1,000,000) x 100 = 4.2%
How to Calculate Net Rental Yield (The More Accurate Method)
This is the professional way to assess your real return after factoring in ongoing costs like property tax, maintenance, loan interest, and agent fees.
Formula:
Net Rental Yield (%) = [(Annual Rental Income - Annual Expenses) ÷ Property Price] x 100
Example:
Using the same $42,000 annual rent, let’s say:
Property tax: $2,800
Maintenance fees: $3,000
Agent commission: $2,000
Loan interest: $8,000
Total Expenses = $15,800
Then:
Net Rental Yield = [($42,000 - $15,800) ÷ $1,000,000] x 100 = 2.62%
👉 This gives you a realistic snapshot of your investment return.
What’s Considered a Good Rental Yield in Singapore?
3% – 4% Net Rental Yield is considered decent for private properties
4% – 5% is excellent for well-located, high-demand units
HDB units often yield higher but come with restrictions (e.g., on ownership and rental)
Rental yield is just one part of the equation. Capital appreciation, property location, tenant profile, and holding power are equally important.
Common Mistakes to Avoid
Forgetting to include ALL costs (loan interest, property tax, vacancy period)
Overestimating rent – base it on actual transacted rental data, not listings
Underestimating vacancy rate – always buffer for 1–2 months a year
Pro Tip: Use Rental Yield to Compare Units
When choosing between two properties, a rental yield comparison can help you identify which one gives you a better income stream—especially if you’re buying for passive income or looking to rent it out immediately.
Final Thoughts
Rental yield may seem simple, but when done properly, it can be your powerful tool for smarter investing.
If you'd like to run the numbers for a specific property you're eyeing—or understand which units are giving better returns—feel free to reach out. I have real-time tools that help my clients compare different units, rental data, and even future appreciation potential.
Let’s work out the numbers together and find a unit that gives you both yield and growth.
