Net Yield

Plain-English definition. Net yield is annual rental income minus all property operating expenses, expressed as a percentage of property value. It shows what an investment property actually returns in cash before financing and tax effects.

How it works in Australia. Calculation: (annual rent − annual expenses) ÷ property value × 100. Expenses include council rates, water, building insurance, landlord insurance, strata levies, property management (typically 6–8% of rent + letting fees), repairs and maintenance (budget 1% of value), and an allowance for vacancy (2–4 weeks per year). Net yield excludes mortgage interest and depreciation — those are financing/tax effects, not operating costs. Australian capital city net yields are typically 1.5–2.5% for houses and 2.5–4% for units.

Concrete example. A $620,000 unit rents at $580/week. Gross rent: $30,160. Strata $4,200, rates $1,800, water $900, insurance $400, management at 7.5% + letting fee = $2,460, maintenance $2,000, vacancy 3 weeks = $1,740. Total expenses: $13,500. Net rent: $16,660. Net yield: 2.69%. The 5.2% gross yield headline collapses to under 3% net — typical for inner-city units.

Common confusion. Listings agents quote gross yield because it sounds better. They also frequently exclude strata from the costs. Always recompute net yield using realistic expense assumptions — the gap between gross and net widens dramatically for high-strata-fee units (waterfront apartments with pools and concierge can have $10k+ annual strata).