Rental Yield Analyzer
The landlord's essential toolkit. Calculate Gross Yield, Net Yield (Cap Rate), and Cash Flow to evaluate property performance instantly.
Maintenance, tax, insurance, etc.
Avg. time property sits empty
Enter property value and rent to see yields
Complete Guide to Rental Property Returns
"In real estate, you make your money when you buy. Understanding your yield ensures you never overpay for an asset."
Understanding Cap Rate (Capitalization Rate)
The Cap Rate is the most important metric in real estate investing. It measures the expected rate of return on an investment property based on the income it is expected to generate. A higher cap rate means higher potential returns but often indicates higher risk. Compare with other investments using our ROI Calculator.
Gross Rental Yield
(Annual Rent ÷ Property Price) × 100Simple calculation before expenses. Good for quick comparisons.
Net Rental Yield (Cap Rate)
((Annual Rent - Expenses) ÷ Property Price) × 100Accounts for operating costs. The true measure of returns.
Cap Rate Benchmarks by Property Type
| Property Type | Typical Cap Rate | Risk Level |
|---|---|---|
| Class A Multifamily | 4-5% | Low |
| Single Family Rental | 5-7% | Medium |
| Office Buildings | 6-8% | Medium |
| Retail Storefronts | 6-9% | Medium-High |
| Value-Add Properties | 8-12% | High |
Key Expenses to Consider
- Property management (8-10%): Even if self-managing, factor this in for scalability
- Vacancy allowance (5-8%): Average time between tenants and during turnovers
- Maintenance & repairs (5-10%): Routine maintenance plus capital reserves
- Property taxes: Varies significantly by location; can be 1-3% of value annually
- Insurance: Landlord policies, liability coverage, flood insurance if applicable
- HOA fees: For condos and some developments; often non-negotiable
The 1% Rule
A popular screening tool: if monthly rent is at least 1% of the purchase price, the property may be worth further analysis. For example, a $200,000 property should rent for at least $2,000/month. This rule is easier to achieve in some markets than others and should be just the starting point, not the final decision maker.
Frequently Asked Questions
What is a good cap rate for rental property?
It depends on location and risk tolerance. In prime urban areas, 4-5% may be excellent. In secondary markets, investors typically target 7-10%. Higher cap rates usually mean higher risk or more work required.
Should I use gross or net yield for comparing properties?
Always use net yield (cap rate) for final decisions. Gross yield is useful for quick screening, but properties with similar gross yields can have very different net yields depending on expense structures.
How does leverage affect my actual returns?
When you use a mortgage, your cash-on-cash return can be much higher than the cap rate. If the cap rate exceeds your interest rate, leverage amplifies returns. Our calculator shows unlevered yield; factor in financing separately.
What is the difference between Cap Rate and ROI?
Cap rate measures property performance without considering financing. ROI includes leverage and all capital invested. A property might have a 6% cap rate but 15% cash-on-cash ROI with the right financing.
How do I increase my rental yield?
Increase rents through renovations, add units (ADU), reduce vacancy with better tenant screening, lower expenses through efficiency improvements, or refinance to lower debt service costs.