RICH Property Solutions, Ahmedabad
Pre-leased property rental yield: how to calculate it
Gross rental yield is the yearly rent divided by the price you pay, shown as a percentage. Net yield takes your yearly costs off the rent first. Compare properties on net yield, using the full cost you will actually pay.
The formula
Gross yield = yearly rent / total purchase cost x 100
Net yield = (yearly rent - yearly costs) / total purchase cost x 100
Total purchase cost is the price plus stamp duty, registration and any brokerage or legal fees.
A worked example
These numbers are made up to show the method. They are not an offer or a quote.
| Purchase price | Rs 1,00,00,000 |
|---|---|
| Stamp duty, registration and fees | Rs 7,00,000 |
| Total purchase cost | Rs 1,07,00,000 |
| Monthly rent | Rs 60,000 |
| Yearly rent | Rs 7,20,000 |
| Gross yield | 7,20,000 / 1,07,00,000 = about 6.7% |
| Yearly costs paid by the owner | Rs 30,000 |
| Net yield | 6,90,000 / 1,07,00,000 = about 6.4% |
What an advertised yield can leave out
- Stamp duty, registration and legal fees added to the price
- Property tax and maintenance the owner pays
- Tax on the rental income
- Months without rent if the tenant leaves
- Rent that stays flat while costs rise
How to compare two properties
- Use the same total purchase cost basis for both
- Use net yield, not gross
- Check how many years of lease are left
- Check how much the rent rises each year
- Check the tenant
Read the lease for each one before you compare. Our pre-leased property page lists what we check, and this page explains the basics.
This page is general information. It is not legal, tax or investment advice. Check the documents of any property with your own lawyer and chartered accountant.
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