Property investment remains one of the most reliable ways to build wealth. But one important question every landlord and investor must ask is, “Am I earning enough from my property?”
The simplest way to answer that is by understanding rental yield how to calculate it. In this guide, we’ll cover what rental yield means, the formulas to calculate it, the difference between gross and net yield, and why it’s a crucial metric for property investors in 2025.
What Is Rental Yield?
For example:
- Property Value: ₹50,00,000
- Annual Rent: ₹300,000
- Rental Yield = (Annual Rent ÷ Property Value) × 100
- Rental Yield = (300,000 ÷ 5,000,000) × 100 = 6%
Why Rental Yield Matters in 2025
- It measures how profitable your property is.
- It helps compare two or more investment opportunities.
- It shows whether to hold, sell, or reinvest.
- It provides clarity for NRIs or absentee landlords managing property from abroad
- Banks and lenders often use yield to evaluate loans or refinancing.
Rental Yield How to Calculate: Two Methods
1. Gross Rental Yield
Formula:
Gross Yield = (Annual Rent ÷ Property Value) × 100
Example:
- Property Price: ₹60,00,000
- Monthly Rent: ₹25,000 (₹300,000 annually)
- Gross Yield = (3,00,000 ÷ 60,00,000) × 100 = 5%
2. Net Rental Yield
- Maintenance and repairs
- Property tax and insurance
- Loan interest (if any)
- Property management fees
Formula:
Net Yield = [(Annual Rent – Annual Expenses) ÷ Property Value] × 100
Example:
- Annual Rent: ₹300,000
- Annual Expenses: ₹60,000
- Property Value: ₹60,00,000
- Net Yield = (240,000 ÷ 6,000,000) × 100 = 4%
What Is a Good Rental Yield?
- Residential Properties: Typically 2–6% in most Indian cities.
- Commercial Properties: Usually 6–10%.
- Short-Term Rentals (Airbnb/serviced apartments): 8–12% but require more effort.
Factors That Influence Rental Yield
- Location: proximity to offices, colleges, or metro stations.
- Property Type: Furnished apartments, gated communities, or offices.
- Market Demand: Growing business hubs push rental rates up.
- Property Condition: Renovated or well-maintained units attract higher rents.
- Professional Management: Ensures fewer vacancies and timely rent collection.
How to Maximize Your Rental Yield
- Upgrade interiors or add tenant-friendly amenities.
- Market your property to professionals or corporate tenants.
- Use property management services to cut down on vacancies.
- Explore short-term rentals in high-demand areas.
- Adjust rent regularly in line with market trends.
Even small improvements can significantly increase your net yield.
Common Mistakes in Calculating Rental Yield
- Ignoring expenses like maintenance, tax, or insurance.
- Using the original purchase price instead of current market value.
- Overestimating rent without checking comparable listings.
- Not factoring in vacancy periods.
- Confusing gross yield with net yield.
Final Word
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At Manex Services, we specialize in managing both residential and commercial assets. From tenant placement and rent collection to facility management, legal compliance, and maintenance, our team ensures your property stays secure, profitable, and hassle-free.
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