How to Calculate Rental Yield
Gross yield is the headline number agents love to quote. Net yield is the one that actually lands in your pocket. Here is how to work out both — with a clear example.
Yield is just a way to measure how hard your property is working as an income asset. Two minutes of arithmetic saves you from buying something that looks good on paper and disappoints in the bank account. Here is the whole thing.
Gross yield — the quick version
Take the monthly rent, multiply by 12, divide by the price. Example: a RM450,000 unit renting at RM1,800/month.
Net yield — the honest version
Now subtract what it actually costs you to hold and run the unit for a year. Using illustrative figures on the same RM450,000 unit:
| Line | Amount (RM/yr) |
|---|---|
| Annual rent | 21,600 |
| Less: maintenance + sinking fund | (3,600) |
| Less: assessment + quit rent | (800) |
| Less: insurance | (400) |
| Less: repairs + vacancy allowance | (2,000) |
| Less: management / agent | (1,700) |
| Net annual income | 13,100 |
Net yield = RM13,100 ÷ RM450,000 = about 2.9%. Same unit, same rent — but a very different picture once the costs are honest. (Figures above are an example; use your own.)
What counts as a sensible yield?
There is no magic number, and anyone who quotes you one without context is selling. The useful comparisons are:
- Against your loan interest rate — if net yield is well below your rate, the rent is not covering the cost of money, so you are betting on capital growth.
- Against safe alternatives like fixed deposits — yield should reward you for the extra effort and risk.
- Remember yield is income only. Total return = net yield + capital appreciation. A lower-yield unit in a growing area can still beat a high-yield unit going nowhere.
Before you trust a yield figure
- Insist on net, not gross — always ask what costs were left out.
- Use a realistic rent, not the best-case asking rent.
- Build in a vacancy allowance — few units are tenanted 12 months a year, every year.
- Look at yield and growth together, never yield alone.
Want me to run the real yield on a unit?
Send me a unit you are eyeing and I will work out the honest net yield — costs and all — so you buy on real numbers, not a brochure figure. I am Louis Koh, over a decade in Johor Bahru property.
Frequently asked questions
How do I calculate rental yield?
Gross yield = annual rent ÷ price × 100%. Net yield subtracts yearly holding costs from the rent first, then divides by the price.
Gross vs net yield?
Gross ignores costs; net is after maintenance, assessment, quit rent, insurance, management and a vacancy allowance. Net is the realistic figure.
What is a good rental yield?
No universal number — compare net yield to your loan rate and to fixed deposits, and remember total return also includes capital growth.
Does yield include capital appreciation?
No — yield is income only. Total return adds appreciation on top.
Want to see actual projects?
From Johor Bahru to Kuala Lumpur, I keep a documented list of what is selling now — take a look and see what fits.