Yield is the return you get from a particular investment. Similarly, a rental yield the rate of return which you get from the rental income from an investment made in property or machinery. Whenever an investor wants to purchase a property, he/she looks at the rental yield of the property. There are two types of rental yields; Gross Rental Yield and Net Rental Yield and we will look at how to calculate rental yield both ways in this answer.
How to calculate rental yield?In a rental yield calculator, there are two ways to calculate the yield as mentioned above. Let us understand both the ways to calculate rental yield with examples:
Gross Rental YieldThe formula to calculate gross rental yield is
Gross Rental Yield = (Annual rental income / property value) x 100The annual rental income as the name suggests is rental income earned each month of the year, i.e. monthly rent x 12, whereas property value is the purchase price of the property.
Here is an example to calculate the gross rental yield:
Rajesh buys a property worth Rs. 50 lakhs and gets an annual rental income of Rs. 250000. He spends Rs. 30,000 on maintenance and upkeep of the property. The gross yield will be calculated as,
Gross Yield = (250000/5000000) x 100
Gross Yield = 5%
In a gross rental yield, the income isn’t determined truly as we do not add the maintenance and upkeep factors in it.
Net Rental YieldThe formula to calculate net rental yield is;
Net rental yield = [(Annual rental income – Annual expenses) / Total property cost] x 100Let us take the above example to understand Net Rental Yield calculation in India
Net rental yield = [(250000 - 30000)/5000000] x 100
Net rental yield = 4.4%
There are many rental yield calculators online which use the same formulas as mentioned above for the calculation of rental yield.
Hi there,
As Surbhi mentioned, the rental yield formula is Net rental yield = [(Annual rental income – Annual expenses) / Total property cost] x 100. If you want to know the factors affecting rental yield, you should read my answer for clarity. I would then come back to how to calculate yield on property.
Factors affecting rental yieldProperty location
Interest rate
Infrastructure
Prevailing rental rates in the market
Jobs in the market
Additional expenses incurred to rent out property
Facilities provided and paid for
I found out that apart from applying the formula above, you can find online rental yield calculators to help you get to the right numbers easily. One of the most effective ones I found out was - https://www.calkoo.com/en/rental-yield-calculator
I hope this helps you out.
Want to create a legally valid rent agreement? Check out NoBroker Online Rent agreement services Pay your rent via NoBroker and get rent receipts to claim HRARead more:
What is rental yield What is yieldCity | Rental Yield |
Delhi NCR | 2.79 percent |
Mumbai | 2.44 percent |
Bangalore | 3.45 percent |
Chennai | 3.10 percent |
Ahmedabad | 3.22 percent |
Pune | 3.09 percent |
Hyderabad | 3.16 percent |
Kolkata | 3.96 percent |
Calculating rental yield is simple, You will need to divide a property's annual rental income by its purchase price. By adding up the monthly rent for the entire year, one can calculate annual rental income.
If you have a property to give out on rent, you can post free ad on NoBrokerI hope this clarifies your query about how to calculate rental yield percentage.
A key factor in determining the profit from a property that generates revenue is rental yield. A percentage is used to compute the rental yield. Rental yield is the portion of a property's value that is generated by annual rental income. It is a commonly used phrase that aids in assessing the possibilities for investment in both residential and commercial properties. With this strategy, investors who intend to rent out their properties can compute and compare the Return on Investment (ROI).
I’d say that gross rental yield and net rental yield are the two approaches to rental yield. The rental yield calculator India mainly follows a particular formula to calculate rental yield.
The formula for Gross yield, as mentioned by others already, is = (annual rental income/ property value) x 100, and the formula for Net rental yield is = [(Annual rental income – Annual expenses) / Total property cost] x 100.
For home buyers who wish to make a profit on their investment, calculating rental yield of the property is of utmost importance. The yield on rental properties is sometimes contrasted with the interest rates offered by other investment channels, including equities, mutual funds, fixed deposits, and gold. Because it is more practical and realistic than gross yield, home buyers should take the net rental yield into account.
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What is Rental Yield? What is a yield?Here is a step by step guide about
how is rental yield calculated
. Rental yield determines the potential return on investment for a property. The formula for calculating rental yield is as follows:
Rental Yield (%) = (Annual Rental Income / Property Purchase Price) x 100
Here's the process on how to calculate rental yield India:
Usually, the monthly rent is multiplied by 12. For example, if your property generates a monthly rent of Rs. 10,000, the annual rental income would be Rs. 10,000 x 12 = Rs. 1,20,000.
Determine the total cost of acquiring the property. It includes the purchase price, stamp duty, registration charges, and any other associated costs. For example, if you purchased the property for Rs. 50,00,000, this is your purchase price.
Plug the annual rental income and property purchase price into the formula:
Rental Yield (%) = (1,20,000 / 50,00,000) x 100
Use the formula to perform the calculation. In this example:
Rental Yield (%) = (2,40,000 / 50,00,000) x 100 = 2.4%
So, the rental yield for your property in this example is 4.8%.
This is
how rental yield calculated
.
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How to Calculate Rental Yield?
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April 23, 2021
2021-04-23T16:57:56+00:00 2023-11-01T15:58:53+00:00Comment
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