The Rental Yield Calculator helps you determine the annual return on your property investment through rental income. By comparing your rental earnings to the property value, this tool provides a clear picture of your investment's profitability. Remember, additional factors like maintenance costs and taxes can impact actual returns.
Property Value
Rental Income
Rental Yield(Net)
0.00When you invest in real estate, it's important to think about how much money you can earn from your investments, so it’s a useful way to measure this by looking at a rental yield which shows how much income you can make from renting a property compared to how much you paid for it. So for calculating you need the Retirewithrohit Rental Yield calculator.
This will help you determine the rental yield produced by a property over a year. A rental yield calculator makes it easy to figure this out and helps investors make better decisions, so in this blog, we will explain what rental yield is, how to calculate it, and many more.
What is Rental Yield?
Rental Yield is the yearly income that you make from renting out a property, shown as a percentage of the property value so this helps the investor to see if a property is a good investment by comparing the rental income to the cost of the property.
In short, here investors plan to rent out their properties which can be calculated and compared to the Return on Investment (ROI) by using this method. So the rental yield shows if the property can earn enough rent to cover the expenses and make a profit. Well, there are two types of rental yield:
- Gross Rental Yield: So this is the basic calculation and doesn’t include any cost like taxes, or maintenance.
- Net Rental Yield: This includes all the property which is related to the cost giving a clear idea of your actual earnings.
How to Calculate Rental Yield?
Rental yield can be calculated manually or using a Rental Yield Calculator, so this is faster and more accurate, so here you can calculate it annually for both Gross rental yield and Net return yield.
Gross Rental Yield Calculation
Here is the formula for calculating the Gross Rental Yield:
“Gross Rental Yield = ( Annual Rental Income/ Property Purchase Price) x 100”
Where,
Annual Rental Income: Here is the amount of rent you expect to receive from the property in a year.
Property Purchase Price: here is the cost you paid for the property which includes any upfront fees.
For example, if the annual retinal income is INR 20,00,000 and the property purchase is INR 40,00,000:
Gross Rental Yield = (20,00,000 / 40,00,000) x 100
= 50%
Net Rental Yield Calculation
To calculate this you need to subtract all the property expenses from the annual rental income first, then dived by the property price here is the formula for calculating the Net Rental Yield:
“Net Rental Yield = ( Annual Rental Income - Expenses / Property Purchase Price) x 100”
Where,
Expenses: these could include maintenance, insurance, taxes, and any management fees.
For example, if the annual retinal income is INR 20,00,000 and your annual expenses amount is INR 60,000, the net income would be annual rental income subtracted from expenses. The property purchase is INR 40,00,000:
Gross Rental Yield = (20,00,000 - 60,000 / 40,00,000) x 100
= (19,40,000 / 40,00,000) x 100
= 48.5%
Example of Rental Yield
Let’s look at a real-world example to understand how a Rental Yield calculator can help property investors make better decisions. So here are the property details:
Property Purchase Price: INR 20,00,000
Annual Rental Income: INR 1,20,000 (monthly rent of INR 10,000)
Annual Expenses:
- Maintenance: INR 2000
- Property Management fees: INR 7000
- Property Taxes: INR 10,000
- Insurance: INR 1000
- Total expenses: INR 20,000
Here we will calculate the Gross Rental Yield,
“Gross Rental Yield = ( Annual Rental Income/ Property Purchase Price) x 100”
Gross Rental yield = (1,20,000 / 20,00,000) x 100
= 0.06 x 100
= 6 %
This tells that the property's gross rental yield is 6% which is a good indicator of their potential to generate income.
Now you have to calculate the Net Rental Yield, so here we account for expenses, first subtract the annual expenses from the annual rental income to get the net income:
“Net Income = Annual Rental Income - Expenses”
Net Income = 1,20,000 - 20,000
= 1,00,000
Now, apply this to the Net Rental Yield formula here:
“Net Rental Yield = ( Annual Rental Income - Expenses / Property Purchase Price) x 100”
Net Rental Yield = (1,00,000 / 20,00,000) x 100
= 0.05x 100
= 5%
So the Net Rental Yield is 5%, which provides a more realistic view of the profitability after considering its ongoing cost.
So the interpretation of the results is,
- Gross Rental Yield (6%): This figure shows the property's raw potential without considering any expenses, so it’s useful for the initial comparisons between properties.
- Net Rental Yield (5%): Here this is a more accurate metric as it considers the actual costs, which gives a true reflection of the return that you can expect after expenses.
Why use a Rental Yield calculator?
Here using a rental yield calculator has several benefits over manual calculation, for the properties investor managing multiple assets, so here’s why a rental yield calculator is essential:
- As it a time-saving calculating the rental yield for multiple properties can be time-consuming but by the help of this calculator it’s a time-saving tool, as this calculator streamlines the process.
- Here they support the decision as to whether you are comparing multiple properties or just one, a rental yield calculator also helps in making fast, data-driven investment decisions.
- They are very accurate as manual calculations are prone to human error, and a calculator ensures precise results.
- This is Comprehensive insight, so this considers the various property expenses, financial costs, and taxes, as this gives a clearer picture of the investment profitability.
What is the importance of Rental Yield?
Here the property owner should understand the concept of rental yield if they wish to compare and enhance their return against the market trends, so the rental yield value cannot be static, as it fluctuates according to various factors, such as location, property types, ongoing rental prices and market conditions.
So, in this case, the property is not achieving the desired rental yield, and adjustments need to be made to maximize the return, this can be done either through optimizing the rental income or managing expenses very effectively.
Also, Check - SIP Calculator
Wrapping Up
Here the Rental Yield Calculator is a very useful tool for the real estate investor, as it gives a clear idea of how profitable a property is helping the investor make a better decision, avoid mistakes, and save time.
So whether you are an experienced investor or just starting or know how to calculate rental yield it is important for long-term success in real estate. So here we are presting RWR Rental Yield which makes it easy to check if a property is a good investment.