Gross yield vs. net yield: which one should you trust?

Imagine two properties for sale in different cities. Property A costs $200,000 and rents for $1,800 a month. Property B costs $200,000 and rents for $1,700 a month. On gross yield alone, Property A wins — 10.8% versus 10.2%. Case closed, right?

Not quite. Property A sits in a high-tax county with $4,800 a year in property tax and needs a management company at 10% of rent, because the owner lives out of state. Property B is in a lower-tax area, self-managed, and needs less maintenance because it’s newer. Once you subtract real operating costs, Property B might easily come out ahead. This is the entire reason net yield exists.

What gross yield actually tells you

Gross yield is annual rent divided by purchase price — nothing else. It’s a screening tool, not an investment decision. It’s useful for scanning through dozens of listings quickly to see which ones deserve a second look. It is not useful for choosing between two or three finalists, because it treats every property’s cost structure as identical, which is almost never true.

What net yield adds back

Net yield takes the same rent figure and subtracts everything it actually costs to generate that income: property tax, insurance, a maintenance reserve, property management fees if you use them, and a realistic allowance for vacancy. What’s left, divided by price, is a far more honest estimate of the income the property will actually put in your pocket.

The gap between gross and net yield tends to be larger in older properties, in high-tax jurisdictions, and in markets where you’ll need professional management. A property with a 9% gross yield and heavy expenses can end up with a lower net yield than a property advertised at 7% gross with light running costs.

A rule of thumb, held loosely

As a rough starting point, net yield often lands two to four percentage points below gross yield once realistic expenses are included — but this varies enormously by property age, location, and whether you self-manage. The only way to know for a specific deal is to run the actual numbers.

That’s exactly what the rental yield calculator does — enter the price, rent, and your estimated operating expenses, and it shows both figures side by side along with net yield on total acquisition cost, which folds in closing costs too.