Understanding Investment Property Yield — A Complete Guide
Gross vs net yield, typical expenses, vacancy assumptions and cash‑flow basics for property investors.
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Overview
Yield measures the return a property generates relative to its price. Gross yield uses rent ÷ price and is quick to compare suburbs and listings. Net yield deducts ongoing costs (rates, insurance, management, maintenance) and factors vacancy, giving a truer picture of income performance. Investors use yield alongside cash‑flow and growth expectations to build portfolios aligned to risk and goals. This guide clarifies the metrics, typical expenses to include, how vacancy changes outcomes, and provides a calculator to run your own scenarios.
Common expenses to include
- Property management fees\
- Council/municipal rates and insurance\
- Maintenance and letting fees\
- Estimated vacancy allowance (e.g., 2–5%)
Cash‑flow vs yield
Yield is a percentage metric. Cash‑flow measures dollars in vs out, including interest (if any). Both are useful when comparing investments.
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Sources
- ATO — Rental properties (deductible expenses context): https://www.ato.gov.au
- CoreLogic — Market insights (rental yields context): https://www.corelogic.com.au
Frequently asked questions
Is gross yield enough to compare properties?
Gross yield ignores costs and vacancy. Net yield or cash-flow is more informative for comparisons.
How does vacancy affect net yield?
Including a realistic vacancy allowance reduces expected income and lowers net yield to a more conservative estimate.
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