Property Rental Yield Calculator
This property yield calculator is a tool used to estimate the return on investment (ROI) for a real estate property. It helps investors evaluate the profitability and potential income of a property by considering various factors such as purchase price, rental income, expenses, and financing costs.
To calculate property yield, there are a few commonly used metrics:
Gross Rental Yield: This metric calculates the annual rental income as a percentage of the property’s purchase price. The formula is:
Gross Rental Yield = (Annual Rental Income / Property Purchase Price) * 100
Net Rental Yield: This metric takes into account the property’s expenses and is considered a more accurate representation of the property’s profitability. The formula is:
Net Rental Yield = (Annual Rental Income – Annual Expenses) / Property Purchase Price) * 100
Annual Expenses include property management fees, property taxes, insurance, maintenance costs, and other relevant expenses.
Cash-on-Cash Return: This metric measures the return on the actual cash invested in the property. It considers the net operating income after deducting expenses, mortgage payments, and any down payment made. The formula is:
Cash-on-Cash Return = (Annual Net Operating Income / Total Cash Invested) * 100
Total Cash Invested includes the down payment, closing costs, and any other upfront expenses.
These calculations provide a basic understanding of the property’s yield. However, it’s important to note that they don’t capture factors such as property appreciation, tax benefits, or potential changes in market conditions, which can affect the overall return on investment. It’s advisable to consult with a financial professional or use specialized real estate investment software to obtain a more accurate analysis tailored to your specific investment scenario.