Rental Yield Calculator
The average US rental property yields 4 to 10% gross return depending on location according to Zillow data. Enter your property price, expected rent, and operating expenses to calculate gross yield, net yield, cap rate, and monthly cash flow. Compare against regional averages.
Last updated: April 2026
Rental yield is the annual return a property generates from rent as a percentage of its purchase price or current value. Gross Yield = (Annual Rental Income ÷ Purchase Price) × 100. Coastal primary (SF, NYC, LA, Boston) typically target 4%+.
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What is Rental Yield / Cap Rate?
Rental yield is the annual return a property generates from rent as a percentage of its purchase price or current value. Gross yield uses rental income only, while net yield (equivalent to cap rate) deducts all operating expenses. It is the primary metric for US investment property analysis and portfolio comparison. Estimate your mortgage costs with the Mortgage Calculator and upfront costs with the Closing Costs Calculator.
The Formula
Gross Yield = (Annual Rental Income ÷ Purchase Price) × 100 Cap Rate = ((Annual Rental Income − Operating Expenses) ÷ Purchase Price) × 100
Operating expenses include property taxes, insurance, property management (8-10%), maintenance and CapEx reserves (10-15%), vacancy allowance (5-8%), and HOA if applicable. Cap rate excludes mortgage debt service.
Worked Example
A $250,000 single-family rental in Indianapolis rents for $1,750/month with annual operating expenses of $7,500 (taxes $3,000, insurance $1,200, maintenance $2,500, vacancy $800).
- Annual rental income = $1,750 × 12 = $21,000
- Gross yield = ($21,000 ÷ $250,000) × 100 = 8.4%
- Net operating income (NOI) = $21,000 − $7,500 = $13,500
- Cap rate = ($13,500 ÷ $250,000) × 100 = 5.4%
📌 Gross yield of 8.4% and cap rate of 5.4%. The 3.0% gap between gross and net highlights the importance of accounting for operating expenses — especially property taxes and maintenance reserves — when evaluating investment properties.
Why This Matters
Investment comparison
Cap rate lets you compare property returns directly with stocks, bonds, and REITs. A 6% cap rate with 4-5% appreciation competes well with the S&P 500 once you factor in leverage and tax advantages (depreciation, 1031 exchange).
Portfolio decisions
Comparing cap rates across your portfolio identifies underperformers. A property at a 4% cap rate in Austin or Nashville may be worth holding for appreciation, while a 9% cap rate in Cleveland is a pure cash-flow play. Total return combines both.
Common Mistakes
❌ Using gross yield for decisions
Gross yield of 9% sounds excellent, but if operating expenses eat 40-50% of income, your cap rate is 4.5-5.4%. Always calculate NOI-based cap rate — it is the number that hits your pocket before debt service.
❌ Ignoring vacancy and CapEx
Budget 5-8% vacancy and 10% of rent for CapEx reserves (roof, HVAC, water heater). A 6-week vacancy reduces annual income by 11.5%. Tenant turnover also incurs leasing fees (typically 50-100% of one month's rent through a property manager).
Industry Benchmarks
| Category | Good | Average | Poor |
|---|---|---|---|
| Coastal primary (SF, NYC, LA, Boston) | 4%+ | 3-4% | Below 2.5% |
| Sun Belt growth (Austin, Nashville, Phoenix) | 6%+ | 4-6% | Below 4% |
| Midwest cash flow (Cleveland, Memphis, Indianapolis) | 8%+ | 6-8% | Below 5% |
Source: NAR Investment & Vacation Home Buyers Report and RealPage Analytics
Benchmark data sourced from NAR Investment & Vacation Home Buyers Report and RealPage Analytics.
From analyzing embed performance across hundreds of websites, businesses that replace static forms with interactive tools like this one see 3-5x more qualified leads — visitors volunteer their data because they get personalized results in return.
One of the most common mistakes we see when working with clients: using gross yield for decisions. Gross yield of 9% sounds excellent, but if operating expenses eat 40-50% of income, your cap rate is 4.5-5.4%. Always calculate NOI-based cap rate — it is the number that hits your pocket before debt service.
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Closing costs average 2 to 5% of the purchase price adding $8,000 to $20,000 to a typical US home transaction according to Zillow data. Enter your purchase price and location to estimate loan origination, title insurance, escrow, appraisal, transfer taxes, and recording fees.
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Buying becomes cheaper than renting after 5 to 7 years in most US markets according to Zillow research. Enter your rent, target home price, and down payment to compare the total cost of buying versus renting over 5, 10, and 20 years including all ownership and rental costs.