📘 What is Good Rental Yield in Real Estate Investing?

Rental yield is a metric that helps real estate investors measure the income they generate from a property relative to its cost or value. A good rental yield means you're earning a strong return on your investment through rental income.

📌 When and Why Rental Yield is Used

Rental yield is used to evaluate the profitability of a rental property, especially when comparing multiple investment opportunities. It's a key factor in deciding whether a property is worth purchasing or holding, and it also influences financing decisions and risk assessments.

🧮 How to Calculate Rental Yield

There are two main types: gross rental yield and net rental yield.

• Gross Rental Yield looks at the income before expenses.
  
• Net Rental Yield accounts for costs like property taxes, insurance, maintenance, and property management fees.
  

📏 Gross Rental Yield Formula:

Example: If a property earns $18,000 annually in rent and is valued at $300,000: ‍

Yield = (18,000 / 300,000) × 100 = 6%

❓ What Is Considered a Good Rental Yield?

• 5–8% is generally considered good in most U.S. markets.
  
• Yields above 8% may indicate high risk or undervalued opportunities.
  
• Yields under 4% may be acceptable in appreciating markets or luxury segments.
  

✅ Pros

• Helps compare rental properties across different markets
  
• Offers a quick snapshot of profitability
  
• Useful for both long-term and short-term investment strategies
  

⚠️ Cons

• Gross yield doesn’t factor in expenses
  
• Doesn’t account for vacancy, appreciation, or tax considerations
  
• Can be misleading if property value fluctuates rapidly