Formula
Gross yield ignores expenses and financing:
gross yield = monthly rent × 12 / purchase price
The result is a percent. Mortgage and home-price tools already live under Finance, so they are not repeated in Real Estate.
Assumptions
- Rent is collected for all 12 months.
- The price is the purchase price, not the loan balance.
- Vacancy, repairs, tax, and debt are left out on purpose.
Worked example
A price of $300,000.00 and monthly rent of $1,800.00 is a gross yield of 7.20%.
Input definitions
- Purchase price
- What you pay for the property.
- Monthly rent
- The rent for one month. The page multiplies it by 12.
Limitations
Gross yield can look strong while the property still loses money after costs. Use the cap rate when operating costs matter, and cash-on-cash when debt matters.
Questions
Does this subtract the mortgage?
No. Gross yield is rent over price. Debt belongs in the cash-on-cash calculator.
Is this the same as return on investment?
No. ROI compares a returned amount with an invested amount. Yield compares rent with the property price.