Gross versus net rental yield: do not compare properties using one incomplete percentage
Gross rental yield is the simplest way to relate rent to property price, but it does not show what remains after ownership expenses. Two apartments can both advertise a 6% gross yield while producing very different net cash because aidat, vacancy, management, maintenance or insurance differ. Good analysis starts by defining the numerator and denominator consistently and then moves from theoretical rent to evidenced income and the expenses the owner actually bears.
Calculate gross yield consistently
The common formula is annual gross rent divided by purchase price. If monthly rent is 30,000 and purchase price is 6 million, annual rent is 360,000 and gross yield is 6%. But specify whether the denominator is contract price only or total acquisition cost. Contract price is useful for quick comparison; for investment decisions, also calculate return on the total cash committed to acquire and prepare the asset.
Use realistic rent, not the highest listing
Do not take the highest asking rent in the district as guaranteed income. Use relevant comparables for location, size, condition, building quality and furnishing and distinguish asking data from completed leases. If the property is already rented, examine the actual contract and payment history. For a vacant or new unit, use a conservative range based on current market evidence rather than a developer’s promotional target.
Include vacancy and tenant turnover
Property is not always occupied for twelve uninterrupted months. Time can be lost to marketing, repairs, cleaning, handover or disputes. A vacancy allowance or explicit number of empty weeks makes the model more realistic. A high-rent specialist unit may show an attractive gross yield but weak net performance if it takes longer to re-let.
Determine who pays aidat and common charges
Some leases pass many recurring charges to the tenant, while other costs remain with the owner. Do not assume every building charge is recoverable. Review the lease, management plan and building budget. Special assessments or major common works can materially reduce one year’s net return even though headline rent stays unchanged.
Include management, marketing and collection costs
A remote owner or investor using a manager should include management fees, tenant-finding fees, advertising, photography, inspections and collection costs. Self-management also consumes time, but the cash model should at least capture direct payments. Do not compare a property you can manage personally with one that necessarily requires professional management without adjusting the cost base.
Separate routine maintenance from capital expenditure
Fixing a tap or servicing an air conditioner is an operating cost; replacing a kitchen, roof or major shared system is closer to capital expenditure. For long-term analysis, use an annual reserve for larger replacements instead of pretending they never occur until the expensive year arrives. A new property is not maintenance-free; its major replacement cycle is simply further away.
Include insurance, municipal tax and administration
Add DASK, additional insurance, municipal property tax and recurring accounting or administrative costs borne by the owner. Rental-income taxation is a separate tax analysis that depends on the owner and current rules. It is useful to calculate property-level net operating return before income tax and then analyse owner tax separately.
Do not confuse property yield with leveraged equity return
With financing, the property’s net yield before debt is different from the buyer’s cash-on-cash return after interest and principal payments. Measure the asset first as if it had no loan, then overlay financing. This makes it clear whether the property itself is efficient or whether leverage is making the equity percentage appear attractive.
Run more than one scenario
Build a base case and a conservative case with slightly lower rent, more vacancy, higher maintenance and a higher common-charge assumption. If the investment collapses under small changes, the margin is weak. A resilient rental property remains acceptable without assuming the maximum rent every month.
Use net yield for final comparison
Gross yield is useful for fast screening; net yield is much closer to the real economics of ownership. Build the same table for every property: acquisition price, rent, vacancy, management, owner-paid aidat, maintenance, insurance, municipal tax and capex reserve. Compare the resulting net returns on the same basis. This prevents a simple marketing percentage from hiding an expensive-to-operate asset.
2026 investment decision update — Gross vs Net Rental Yield
Show gross and net yield together because they answer different questions. Gross yield is only a screening metric; net yield tests operating economics after vacancy, owner-paid charges, management, maintenance and insurance. Keep the denominator consistent across properties: contract price or all-in cost, never a mixture.
The latest available CBRT Residential Property Price Index and New Tenant Rent Index release is July 2026. Use the indices for market direction and relative change; a specific asset value or achievable rent still requires current like-for-like evidence.
Formula / decision check: Gross yield = annual contracted/achievable rent / acquisition price; net yield = (rent actually collected - owner-paid operating costs) / all-in acquisition cost.