What rental yield is and how it is calculated
What are the types of rental yield?
There are two types of rental yields: gross and net
Gross rental yield
This is the return you calculate if you just consider the total rent, without including any costs or expenses incurred by you on the property during the year.
Net rental yield
If, however, you subtract maintenance expenses, property taxes, home insurance premium, etc, it will give you net rental yield. This gives a more realistic idea of the return you can expect from your property.
Rental yield
To put it simply, rental yield is the return on your real estate investment if you were to rent it out. It is calculated by comparing the rent to the purchase price or market value of the property. In other words, rental yield is your annual rent as a percentage of the property value.
It can help home buyers take informed decisions on whether they should invest in a house for rental purposes by comparing it with other investment options; choosing the city or location for buying a house by comparing rental properties; and setting realistic rents for their houses.
How is it calculated?
If you get a monthly rent of Rs.60,000, and the property value is Rs.2 crore, you can calculate gross rental yield using the following formula:
Bengaluru tops rental yields Source: Anarock Research. Data for Q1 2024
