Investing · 5 min read
Understanding rental yield (and why net yield is the honest number)
Gross vs net rental yield, why the gap matters, and the costs most yield calculators quietly skip.
Every property listing aimed at investors quotes a yield figure. Almost all of them quote grossyield, because it's higher. Most never define net yield, because it's usually embarrassing. The gap between the two is the whole game.
Gross yield
Gross yield = annual rent ÷ property value × 100
$600/week rent on a $750,000 property = $31,200/year ÷ $750,000 = 4.16% gross yield. Easy to compute, easy to compare, useful for screening — but it ignores every cost between the tenant and your bank account.
Net yield
Net yield = (annual rent − annual outgoings) ÷ property value × 100
"Annual outgoings" covers what the landlord wears even when the property is fully tenanted: council rates, strata, insurance, maintenance allowance, property management fee, and a vacancy allowance for the weeks it's not let.
On the same $750k / $600pw property, realistic numbers look like:
- Council rates: $2,200/yr
- Strata (apartment): $4,500/yr (or $0 for a free-standing house)
- Insurance: $1,400/yr
- Maintenance allowance: $2,000/yr (~0.3% of value, conservative)
- Property management at 7% of effective rent: ~$2,000/yr
- Vacancy allowance (2 weeks): $1,200/yr
Total: ~$13,300/yr on a free-standing house, or ~$17,800/yr on a unit. Net yield drops from 4.16% to 2.4-2.6%.
What net yield still doesn't include
Loan interest.Net yield measures the property as a productive asset, separate from how you finance it. A leveraged purchase is a bet on the difference between the property's net yield and your mortgage rate.
Tax. Negative gearing and depreciation flip the after-tax return materially. So does which entity holds the property (individual vs SMSF vs company).
Capital gains. Most Australian property returns come from capital growth, not yield. Net yield tells you the carrying cost of the bet, not the bet itself.
How to use it
For shortlisting, sort by gross yield to find suburbs where rent is generous relative to price — these are usually outer regional or specific cycles in capital cities. Then for the short list, compute net yield with realistic outgoings; many "high yield" properties don't survive the strata column.
On Burbfinder, every suburb page shows median sale price and median rent where the data is published. The rental yield calculator prefills both when you click through from a suburb page — defensible numbers, not real-estate-listing optimism.