Understanding rental yield is essential if you're buying an investment property in Australia. It's not just a number, it's a key indicator of how effectively your property generates income relative to its value. Whether you're an experienced investor or just starting your property journey, rental yield helps you compare properties, suburbs, and strategies to maximise returns.
As mortgage brokers at Stryve Finance, we often guide clients on how to use rental yield as part of a smart property finance strategy, balancing income, growth, and loan serviceability. In this guide, we'll break down everything you need to know: what rental yield is, how to calculate it (both gross and net), and how to use it when assessing properties and loans.
What is Rental Yield?
Rental yield is a simple percentage that shows how much rental income a property generates compared to its purchase price or current market value. It helps you quickly assess a property's financial performance and whether it might be a wise investment.
There are two main types of rental yield you need to understand:
1. Gross Rental Yield
This is the “headline” figure, it tells you what percentage of the property value you're earning in rent before expenses.
It's helpful for quickly comparing multiple properties or markets, but it doesn't reflect your real, take-home return.
2. Net Rental Yield
This is your actual return after deducting running costs, such as council rates, insurance, maintenance, and property management.
This is the figure that matters most when deciding if a property will generate positive cash flow.
Why Both Gross and Net Matter
- Gross yield is quick and easy for comparisons
- Net yield gives a clearer picture of cash flow and long-term viability
- Lenders and brokers (like us at Stryve Finance) often use gross yield for servicing, but net yield is better for investment planning
In the following sections, we'll walk you through exactly how to calculate each, with clear examples you can follow.
Read also: Best Suburbs to Invest in Melbourne 2025
How to Calculate Gross Rental Yield
Gross rental yield is the simplest way to measure a property's rental return. It calculates your annual rental income as a percentage of the property's purchase price (or market value). It doesn't factor in any ongoing costs associated with owning the property, so it's a good high-level comparison tool but not the whole picture.
Gross Rental Yield Formula
Gross Rental Yield (%) = (Annual Rent ÷ Property Value) × 100
You can calculate the annual rent by multiplying the weekly rent by 52.
Example:
- Weekly rent: $600
- Annual rent: $600 × 52 = $31,200
- Purchase price: $750,000
Gross Yield = ($31,200 ÷ $750,000) × 100 = 4.16%
So, this property has a gross rental yield of 4.16%.
When to Use Gross Yield
- Comparing multiple investment opportunities
- Evaluating the rental return potential of different suburbs or property types
- Providing a quick estimate for the lender's loan servicing
Tip
While helpful for quick comparisons, gross yield can mislead if you don't also consider costs, which we'll cover in the next section on net yield.
Read also: Best Suburbs to Invest in Sydney
How to Calculate Net Rental Yield
While gross yield glances at you, net rental yield is the figure that tells you the true profitability of an investment property. It factors in your annual expenses, giving a more accurate picture of your cash flow and return on investment.
Net Rental Yield Formula
Net Rental Yield (%) = [(Annual Rent – Annual Expenses) ÷ Property Value] × 100
This formula considers all the regular costs of owning a rental property, such as:
- Property management fees
- Council rates
- Insurance
- Maintenance
- Strata/body corporate fees (if applicable)
- Allowance for vacancy periods
Example Calculation
Let's say you own a unit in Brisbane that rents for $600 per week.
- Annual Rent: $600 × 52 = $31,200
- Annual Expenses:
- Property management: $2,500
- Council rates: $1,800
- Insurance: $600
- Maintenance: $800
- Strata: $1,200
- Vacancy allowance (2 weeks): $1,200
- Total Expenses = $8,100
- Purchase Price: $750,000
Net Yield = ($31,200 – $8,100) ÷ $750,000 × 100 = 3.08%
Why Net Yield Is More Useful
- Reflects actual cash flow
- Better for long-term investment decisions
- Helps compare high-yield vs high-growth strategies
- Preferred for realistic portfolio planning
Pro tip from Stryve Finance
Always calculate net yield when evaluating whether a property will be positively geared, especially if you plan to hold it long term.
What's a Good Rental Yield in Australia?
A “good” rental yield depends on where the property is located, the type of property, and your investment goals, but generally speaking, yields above 5% are considered solid in most markets.
Here's a breakdown of average gross rental yields across key regions in Australia (2025 estimates):
Rental Yield Benchmarks by Region
| Region | Average Gross Yield | Notes |
|---|---|---|
| Sydney (Metro) | 3.1% - 4% | High capital growth, lower yield |
| Melbourne (Metro) | 3% - 3.8% | Similar to Sydney, low rental return |
| Brisbane (Metro) | 4.5% - 5.5% | Balance of yield and growth |
| Perth (Metro) | 5% - 6% | Stronger yields, especially outer suburbs |
| Regional NSW/VIC | 5.5% - 7.5% | High-yield areas, lower growth potential |
| Darwin/Hobart/Adelaide | 4.5% - 6.5% | Often yield-focused markets |
Interpreting Yield in Context
- High Yield (5%+): Usually found in regional areas or outer suburbs. Great for cash flow, but may come with slower capital growth.
- Moderate Yield (4%-5%): Balanced return. Common in up-and-coming metro areas.
- Low Yield (3%-4%): Typical in inner-city blue-chip suburbs where long-term capital appreciation is the primary strategy.
Tip
A “good yield” isn't always the highest number. It's the one that fits your cash flow needs, tax strategy, and growth goals. Want to know how much money you need to get started? Check out our guide on how much deposit you need for an investment property in Australia.
Read also: Best Suburb to Invest in Brisbane 2025
Rental Yield vs Capital Growth - Which Matters More?
When it comes to property investing, one of the biggest questions investors face is:
Should I chase high rental yield, or focus on capital growth?
The short answer? It depends on your goals.
Let's break it down.
Rental Yield = Cash Flow
Rental yield tells you how much ongoing income a property generates, helping to cover loan repayments and expenses. A higher yield can:
- Provide positive cash flow
- Support additional borrowing (loan servicing)
- Suit retirees or passive-income-focused investors
Capital Growth = Wealth Creation
Capital growth is the increase in property value over time. It doesn't improve cash flow today, but it:
- Builds equity faster
- Allows for equity release to buy more property
- Suits long-term wealth builders
Which One Should You Prioritise?
| Strategy | Focus | Best For.. |
|---|---|---|
| Yield-focused | Cash flow | Retirees, early-stage investors, income seekers |
| Growth-focused | Equity growth | Long-term investors, high-income earners |
| Balanced approach | Yield + Growth | Investors building scalable portfolios |
At Stryve Finance, we help clients align their property finance with the right strategy, whether that's high yield for cash flow or high growth for wealth building. We also help you structure your loans for both flexibility and future borrowing power.
Read also: Best Suburbs to Invest in Perth 2025
How Lenders View Rental Yield (Broker's Perspective)
While rental yield is crucial for investors, it's also something lenders care about, especially when you're financing an investment property. But here's the catch: lenders don't look at it quite the same way you do.
At Stryve Finance, we help our clients understand how banks interpret rental yield when assessing borrowing power, loan servicing, and risk.
Lenders Use Gross Yield, But Discounted
Most lenders assess the gross rental income, not net. However, they apply a discount (usually around 70%-80%) to account for expenses and vacancies.
Example:
$500/week rent = $26,000/year
Bank uses 80% = $20,800 assessed rental income.
This conservative figure is then used in your serviceability calculator, along with your personal income and debts.
Why This Matters for Borrowing Power
- Higher yield means more income to offset the loan
- Positively geared properties improve your ability to borrow again
- Low-yield, high-expense properties may limit future borrowing, even if they grow in value
Property Types That Influence Yield and Risk
- Apartments in high-density areas may have higher yields, but are often subject to tighter lending policies.
- Holiday rentals or Airbnb properties might show strong returns, but many lenders won't accept the full income.
- Off-the-plan or regional properties may be assessed more conservatively
Tip
We guide clients in selecting lender-friendly properties that deliver strong yields and support their long-term financing goals. It's not just about the numbers, it's about how banks see those numbers.
Want to boost cash flow or access equity from a high-yield property? Our guide on how to refinance your investment property walks you through the process.
Conclusion
Knowing how to calculate rental yield, both gross and net, is a must for any serious property investor. It helps you compare deals, plan your cash flow, and decide whether a property truly fits your goals.
But rental yield alone doesn't tell the full story.
Smart property investing also means thinking about:
- Capital growth potential
- Tax efficiency
- Your borrowing capacity
- Interest rate resilience
- Overall portfolio strategy
That's where a mortgage broker who understands the complete investment picture comes in.
Speak with an Expert at Stryve Finance
At Stryve Finance, we don't just get you a loan, we help you build a scalable property strategy.
- Discover how rental yield fits into your long-term goals
- Get tailored advice on high-yield vs high-growth properties
- Learn how to structure your loans for future investments
- Access lenders that understand and reward savvy investors
Ready to maximise your property returns?
Book your FREE strategy session today or call us to speak with an investment finance expert.
Dylan Bertovic is the Director and Senior Finance Broker at Stryve Finance, specialising in non-traditional lending solutions. He helps clients across Australia with tiny home loans, construction finance, equipment and asset lending, refinancing, and investor loans. With deep expertise in self-employed and renovation mortgages, Dylan is known for crafting tailored strategies that get results
