Rental Yield Calculator: Rental yield is simply the proportion of the property value obtained via rent over the course of a year. Rental yields are classified into two types: gross rental yield and net rental yield. navimumbaihouses.com explains the fundamental distinctions between the two and how to calculate them.

Rental yield is an important metric for calculating the profit generated by an income-generating asset. This rental yield calculator can assist you in calculating the rental yield provided by a property over the course of a year. The rental yield is expressed as a percentage.

 

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How do you compute rental yield?

Rental yield may be calculated in two ways: gross rental yield and net rental yield.

 

Gross Rental Income

• Gross Rental Yield is derived by dividing a property’s annual rental income by its purchase price. The annual rental revenue is calculated by aggregating the monthly rental payments for the whole year.
• ·        Annual rental revenue = monthly rental income multiplied by 12
• ·        (Annual rental income/property value) x 100 Equals gross rental yield
• ·        The buying price of a property is its worth.
• ·        Consider an example to have a better understanding. For example, the monthly rent for a property is Rs 25,000, and the buying price is Rs 60, 000.
• ·        So, annual rental revenue = 25,000 multiplied by 12 equals Rs 3,000,000
• ·        Gross rental yield = (300,000/600,000) x 100 = 5%
• ·        The gross rental yield is an estimate that does not take into account taxes, maintenance fees, or any other additional expenses incurred by the owner when renting out the property.

Rental Yield Net

Unlike gross rental yield, net rental yield includes all taxes and costs made over the year in the care of the property. These charges might range from repairs to fixtures, furnishing and fitting fees, non-occupancy, or any additional price imposed by the owner to maintain the property.

 

When calculating the net rental yield, these expenditures are subtracted from the yearly rental revenue.

Net rental yield = [(Annual rental income-Annual expenses)/Property value] multiplied by 100.

For example, suppose the yearly costs for property maintenance for a given year are Rs 50,000.

[(3, 00,000 – 50,000) / 60, 00,000] x 100 = 4.1 percent net rental yield

The current rental yield is 4.1 percent.

 

Net rental yield is a favoured strategy as it delivers a more accurate approximation of real money produced while renting out a property. It is a more practical and realistic method of evaluating various inventories for investment.

 

Rental yield in top 8 cities

Rent is subjective to various external factors such as location, project type, and builder’s reputation. Further, high property prices and demand in Tier-1 cities due to more employment opportunities drive up the overall rental value, while the same may not hold true for other cities.

While luxury and ultra-luxury residences have lower rental yields, cheap and mid-segment properties have greater rental yields and are better investment possibilities because of the higher rate of return.

 

Average rental yield across the top eight metro cities in India

City	Rental yield
Delhi NCR	2.79 percent
Bangalore	3.45 percent
Mumbai	2.44 percent
Ahmedabad	3.22 percent
Chennai	3.10 percent
Hyderabad	3.16 percent
Pune	3.09 percent
Kolkata	3.96 percent

 

Calculating rental yield in advance enables you to select and evaluate several properties for a successful rental investment. However, in order to create significant returns, it is recommended that the rental property be maintained on a regular basis.

 

 

 

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