Most people buying their first investment property spend weeks researching suburbs, scrolling through listings, and obsessing over floor plans.
Very few check rental yield before they make an offer.
That’s a problem. Because rental yield is the number that tells you how hard a property is actually working for you — and without it, you’re guessing.
The Simplest Way to Think About It
Think of a vending machine.
You buy one for $1,000. Every week it earns you $20 in sales. That $20 is your yield — your return on what you paid. It tells you, at a glance, how productive that $1,000 is.
Property works the same way. The purchase price is your cost. The rent is your return. Rental yield is just the relationship between the two.
How to Calculate It
The formula is straightforward:
Annual rent ÷ purchase price × 100 = gross rental yield
Here’s a real example. You buy a property for $800,000. Your tenant pays $800 per week in rent.
- $800 × 52 weeks = $41,600 per year
- $41,600 ÷ $800,000 = 5.2% rental yield
That 5.2% tells you how much income the property generates relative to what you paid for it. The higher the number, the more your tenant is covering your costs.
What’s a Good Number?
Not all yields are equal. Here’s how to read the numbers:
Under 3% — The tenant barely covers your costs. You’ll be topping up the mortgage, rates, insurance, and maintenance largely out of your own pocket every week.
3%–4% — Passable, but you’ll still be contributing a meaningful amount yourself. This can work if growth prospects are exceptional, but it’s not the kind of property that pays its way.
4%–5% — Good. Most of your holding costs are covered by rent. Your weekly top-up is manageable.
5%–6%+ — Strong. Your tenant is covering the majority of what it costs you to hold the property. Minimal out-of-pocket each week, even as the asset grows in value.
At Stonehhart, we target 4–6% gross yield on every property we recommend. It’s not an accident — it’s a deliberate filter to ensure our clients can hold comfortably for the long term.
Why This Matters Week to Week
Rental yield isn’t just an abstract number on a spreadsheet. It shows up in your bank account every single week.
Consider two properties at the same purchase price. One yields 3.2%. The other yields 5.4%. They look similar on paper — same suburb type, same price point, both tenanted.
But the low-yield property might cost you $400–$500 a week out of pocket after rent, mortgage, and costs. The high-yield property might cost you $80.
Same property price. Different yield. Very different weekly experience. And a very different ability to hold — especially if rates move, or a vacancy hits, or life changes.
Gross vs Net Yield
One clarification worth making: what we’ve described above is gross yield — rent as a percentage of price, before costs.
Net yield accounts for your actual expenses: property management fees, council rates, insurance, maintenance, strata (if applicable). It gives you a more accurate picture of what you’re actually pocketing.
Net yield is always lower than gross. For budgeting purposes, you want to know both. But when comparing properties at the research stage, gross yield is the standard benchmark — it’s the number brokers, agents, and advisors use to compare apples with apples.
The Question Yield Answers
Rental yield answers one simple question: how hard is this property working for me?
The higher the yield, the harder it works. A property with strong yield doesn’t just feel good in the abstract — it gives you options. It makes holding easier when markets are flat. It makes adding to your portfolio sooner more viable. It removes the stress of topping up a large mortgage from your salary every month.
That’s why it’s the first number every serious investor checks — not the last.
Want to know what yield we’d target for a property in your price range? Book a strategy session — free, no obligation, and we’ll run the numbers with you.
