Cap Rate Guide: What It Is, How to Calculate It, and What Counts as Good
A practical guide to capitalization rates for rental property investors — building an honest NOI, reading the market, and the traps in seller math.
Read articleRental Yield Calculator
The fastest first screen for any rental: how much income does each dollar of purchase price produce?
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Equivalent to $1,800 per month
Gross Rental Yield
7.20%
Annual Rent$21,600
Monthly Rent$1,800
Gross yield = annual rent ÷ property price. It excludes operating expenses like taxes, insurance, maintenance, and vacancy — subtract those for net yield.
Gross yield, and what it leaves out
Gross rental yield is annual rent divided by purchase price. It's perfect for scanning a dozen listings in a morning — but it ignores taxes, insurance, maintenance, management, and vacancy. Two properties with identical gross yields can produce very different take-home income once those costs land, so use gross yield to shortlist, not to decide.
From shortlist to decision
For finalists, estimate operating expenses and move to cap rate, which works from net operating income instead of gross rent — the Cap Rate Calculator handles it. Don't forget local property taxes, often the single biggest expense line: check them with the Property Tax Calculator.
Frequently asked questions
What is gross rental yield?
Annual rent divided by the property price, expressed as a percentage. It is the quickest way to compare income potential across properties before digging into expenses.
What is the difference between gross and net yield?
Gross yield ignores costs. Net yield subtracts operating expenses like taxes, insurance, maintenance, and vacancy, giving a more realistic picture of the income you keep.
What is a good rental yield?
It depends on the market. Many investors look for gross yields of 6–8% or higher, but expensive coastal markets often trade lower yields for stronger appreciation potential.
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