CRE Basics: Calculate Rental Yield

Rental yield measures the return on investment you can expect from a rental property. To calculate it, you need to determine the property’s annual rental income and divide it by the property’s value or purchase price.

Here’s the formula for calculating rental yield:

(Annual Rent / Property Value) x 100 = Rental Yield

For example, if a property is valued at $1,000,000 and the annual rent is $50,000, the rental yield would be:

($50,000 / $1,000,000) x 100 = 5%

It’s important to note that rental yield is just one aspect to consider when evaluating the potential return on investment for a rental property. Other factors, such as property management costs, mortgage interest, property tax, and common charges (for condos), will also impact the overall return on investment.