About

For real estate investors, the raw price of a property means little without context. The key metrics of success are Rental Yield and Capitalization Rate (Cap Rate). These figures convert the property's cost and rental income into percentage returns, allowing for direct comparison against other asset classes like stocks or bonds.

This tool analyzes the efficiency of an investment by calculating the Gross Yield (top-line revenue) and Net Yield (after expenses). It also includes a "Break-Even Analysis" to visualize how long it will take for the cumulative rental income to cover the initial purchase price, providing a clear timeline for capital recovery.

Formulas

Gross Rental Yield: Measures the return before expenses.

Yield_gross = Rent_annualPrice_property × 100

Net Rental Yield (Cap Rate): Measures the return after operating expenses (Tax, Insurance, Maint).

Yield_net = (Rent_annual − Exp_annual)Price_property × 100

Break-Even Point (Months):

Months = Price_propertyRent_{monthly_net}

Reference Data

Metric	Formula Concept	Good Target Range (Residential)
Gross Yield	(Annual Rent / Property Cost)	5% - 9%
Net Yield (Cap Rate)	(Net Income / Property Cost)	4% - 8%
GRM	(Price / Annual Rent)	8 - 12 (Lower is better)
Expense Ratio	(Expenses / Gross Income)	35% - 50%
Cash on Cash	(Cash Flow / Cash Invested)	8% - 15%

Frequently Asked Questions

Gross Yield is a quick 'back-of-the-napkin' calculation using only rent and price. Net Yield is far more accurate as it subtracts costs like property management fees, repairs, taxes, and insurance, giving you the true Return on Investment (ROI).

GRM is the number of years it would take for the property to pay for itself using gross rent. It is calculated as Property Price divided by Annual Gross Rent. A lower GRM indicates a better investment opportunity.

No. This calculator determines the 'Cap Rate' or Net Yield of the asset itself, assuming an all-cash purchase. To calculate returns with leverage (mortgage), you would look for a 'Cash on Cash Return' calculator.