Why Use Gross Yield?
Gross Rental Yield is the perfect "napkin math" metric. When you are scanning Zillow or MLS listings, you don't have time to calculate taxes, insurance, and maintenance for every single house. Gross Yield lets you filter 100 listings down to the best 5 in minutes.
The Formula
(Annual Rent / Total Purchase Price) x 100
Example: A $200,000 house renting for $1,500/month ($18,000/year).
($18,000 / $200,000) = 0.09 x 100 = 9% Yield.
Warning: It's Just a Starting Point
Gross yield ignores expenses. A 12% yield might look amazing, but if the property taxes are $10,000/year and the area has high vacancy, your Net Yield could be zero. Always follow up with a full ROI Analysis.
Yield Benchmarks
- 3-5%: Typical in high-cost, high-appreciation markets (e.g., Los Angeles, NYC).
- 6-8%: Solid cash flow territory. Common in balanced markets.
- 10%+: Excellent cash flow potential, often found in lower-cost Midwest or Southern markets.