How to Calculate Rental Yield?

Yield is the return you get from a particular investment. Similarly, a rental yield the rate of return which you get from the rental income from an investment made in property or machinery. Whenever an investor wants to purchase a property, he/she looks at the rental yield of the property. There are two types of rental yields; Gross Rental Yield and Net Rental Yield and we will look at how to calculate rental yield both ways in this answer. 

How to calculate rental yield?

In a rental yield calculator, there are two ways to calculate the yield as mentioned above. Let us understand both the ways to calculate rental yield with examples:

Gross Rental Yield

The formula to calculate gross rental yield is 

Gross Rental Yield = (Annual rental income / property value) x 100 

The annual rental income as the name suggests is rental income earned each month of the year, i.e. monthly rent x 12, whereas property value is the purchase price of the property.

Here is an example to calculate the gross rental yield:

Rajesh buys a property worth Rs. 50 lakhs and gets an annual rental income of Rs. 250000. He spends Rs. 30,000 on maintenance and upkeep of the property. The gross yield will be calculated as,

Gross Yield = (250000/5000000) x 100

Gross Yield = 5%

In a gross rental yield, the income isn’t determined truly as we do not add the maintenance and upkeep factors in it.

Net Rental Yield

The formula to calculate net rental yield is;

Net rental yield = [(Annual rental income – Annual expenses) / Total property cost] x 100

Let us take the above example to understand Net Rental Yield calculation in India

Net rental yield = [(250000 - 30000)/5000000] x 100

Net rental yield = 4.4%

There are many rental yield calculators online which use the same formulas as mentioned above for the calculation of rental yield.

Rental yield is a crucial metric for property investors or owners, indicating the annual return on investment from rental income. You must know how to calculate rental yeild. Usually, rental yield can be calculated by subtracting all the expenses from your annual rental income, multiplying them by 100 and dividing them by your annual rental income. Let me explain it with an example.

How to Calculate the Rental Yield?

There are two main types of rental yield: Gross Rental Yield and Net Rental Yield.

• Gross Rental Yield: Gross Rental Yield is calculated without considering expenses. The formula is:

Gross Rental Yield = (Annual Rental Income/Property Value) x100

Example:

• Monthly Rent: Rs 50,000

• Annual Rental Income: Rs50,000 x 12 = Rs6,00,000

• Property Value: Rs60,00,000

Gross Rental Yield = (6,00,000)/(60,00,000) x 100 = 10%

• Net Rental Yield:

  Net Rental Yield accounts for expenses such as maintenance, property management fees, and taxes. As Surbiij mentioned the formula is:

Net Rental Yield (%) = (Annual Rental Income – Expenses) / Property Value x 100

Example:

• Annual Rental Income: Rs3,00,000

• Annual Expenses: Rs50,000

• Property Value: Rs60,00,000

Net Rental Yield = ((3,00,000 - 50,000)/(60,00,000)) x 100 = 4.17%

Factors Affecting Rental Yield

• Location: Prime locations typically offer higher rental yields.

• Property Type: Commercial properties often yield more than residential ones.

• Market Conditions: Economic factors and demand-supply dynamics influence rental yields.

• Property Condition: Well-maintained properties attract higher rents.

Understanding and calculating rental yield helps you make informed decisions and optimise their returns. I hope this answers your questions about how do I calculate my rental yield.

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What is the Commercial Rental Yield in Bangalore

 

Here is a step by step guide about

how is rental yield calculated

. Rental yield determines the potential return on investment for a property. The formula for calculating rental yield is as follows:

Rental Yield (%) = (Annual Rental Income / Property Purchase Price) x 100

Here's the process on how to calculate rental yield India:

1. Usually, the monthly rent is multiplied by 12. For example, if your property generates a monthly rent of Rs. 10,000, the annual rental income would be Rs. 10,000 x 12 = Rs. 1,20,000.

2. Determine the total cost of acquiring the property. It includes the purchase price, stamp duty, registration charges, and any other associated costs. For example, if you purchased the property for Rs. 50,00,000, this is your purchase price.

3. Plug the annual rental income and property purchase price into the formula:

Rental Yield (%) = (1,20,000 / 50,00,000) x 100

Use the formula to perform the calculation. In this example:

Rental Yield (%) = (2,40,000 / 50,00,000) x 100 = 2.4%

So, the rental yield for your property in this example is 4.8%.

This is

how rental yield calculated

.

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Calculating rental yield is simple, You will need to divide a property's annual rental income by its purchase price. By adding up the monthly rent for the entire year, one can calculate annual rental income.

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I hope this clarifies your query about how to calculate rental yield percentage.

A key factor in determining the profit from a property that generates revenue is rental yield. A percentage is used to compute the rental yield. Rental yield is the portion of a property's value that is generated by annual rental income. It is a commonly used phrase that aids in assessing the possibilities for investment in both residential and commercial properties. With this strategy, investors who intend to rent out their properties can compute and compare the Return on Investment (ROI).

I’d say that gross rental yield and net rental yield are the two approaches to rental yield. The rental yield calculator India mainly follows a particular formula to calculate rental yield. 

The formula for Gross yield, as mentioned by others already, is = (annual rental income/ property value) x 100, and the formula for Net rental yield is = [(Annual rental income – Annual expenses) / Total property cost] x 100.

For home buyers who wish to make a profit on their investment, calculating rental yield of the property is of utmost importance. The yield on rental properties is sometimes contrasted with the interest rates offered by other investment channels, including equities, mutual funds, fixed deposits, and gold. Because it is more practical and realistic than gross yield, home buyers should take the net rental yield into account.

Read More:

What is Rental Yield?  What is a yield? 

Hey Pal, Rental yield is essentially the portion of the property value that is obtained through rent over the course of a year. Gross rental yield and net rental yield are the two different forms of rental yields. A key factor in determining the profit from an asset that generates revenue is rental yield. You can use this rent yield calculator to estimate the annual rental yield of a certain property. A percentage is used to compute the rental yield. Want to draft a rent contract that is enforceable in court? View the rent agreement services offered by NoBroker online. Utilise NoBroker to pay your rent, then acquire rent receipts to use for HRA. According to my research regarding which city is having the highest and lowest yield on rental property, I found that the greatest rental yield is 3.96 percent in Kolkata, while the lowest is 2.79 percent in Delhi. As you must be aware of the rent yield formula provided by the previously mentioned answer by Surbhij. Hence, I would like to share that the rent varies depending on a number of outside factors, including location, project kind, and builder repute. In Tier-1 cities, where there are more employment prospects, high property prices and demand also raise the overall rental value, but this may not be the case in other cities. Affordable and mid-segment houses offer higher rental yields and are advantageous investment possibilities due to a better rate of return, but luxury and ultra-luxury homes often create lower rental yields. Average rental yield amongst top 8 metro cities in India:

City	Rental Yield
Delhi NCR	2.79 percent
Mumbai	2.44 percent
Bangalore	3.45 percent
Chennai	3.10 percent
Ahmedabad	3.22 percent
Pune	3.09 percent
Hyderabad	3.16 percent
Kolkata	3.96 percent

I would like to conclude my discussion here about the rent yield calculator to estimate the annual rental yield of a certain property. I hope this helps:) Read More: How to Calculate Rental Yield? What is Rental Yield: How to Calculate Rental Yield?

Hi there, 

As Surbhi mentioned, the rental yield formula is Net rental yield = [(Annual rental income – Annual expenses) / Total property cost] x 100. If you want to know the factors affecting rental yield, you should read my answer for clarity. I would then come back to how to calculate yield on property.

Factors affecting rental yield

• Property location

• Interest rate

• Infrastructure

• Prevailing rental rates in the market

• Jobs in the market

• Additional expenses incurred to rent out property

• Facilities provided and paid for

I found out that apart from applying the formula above, you can find online rental yield calculators to help you get to the right numbers easily. One of the most effective ones I found out was - https://www.calkoo.com/en/rental-yield-calculator

I hope this helps you out. 

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