How to Calculate Rental Yield

The following formula shows how to calculate rental yield accurately by taking into all costs that are often overlooked:

Rental yield in %=
(Net Annual Rent Collected / Total Cost of Property) x 100 %

(Net Annual Rent Collected = Total Rent Collected - maintainence cost, property tax, property agent cost, income tax, vacant cost etc)

( Total Cost of Property = Price of Property + Stamp Duty + Legal fees + Renovation + furnishing)

Example (assuming no mortgage):
If you bought a property for $600,000 (inclusive of all costs), you rent it for $2000/month and your monthly maintainence is $200, agent fee is 1 month's rent, amortised furnishing cost is $500/year (i.e. you spend $5k on furnishing and expect it to last for 10 Years so amortised cost = $5000/10 years), property tax (10% of annual value) is $2400, and assuming other costs to be negligible, we have:

Net Annual Rent Collected in $ = $2000x12 - ($200x12 + $2000 + $500 +$2400) = $16,700

Rental Yield = ($16,700/$600,000) x 100 = 2.78% ~ 3%

If the mortgage rate is 3%, then rental yield will just be about enough to pay for your mortgage interest (only).

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Kenneth Chan 曾健德
Associate Division Director
ERA REALTY NETWORK PTE LTD
CEA Licence No.:
L3002382K / R024796D
+(65) 9100 6270