Rental Yield: What's a Good Number and Why Most Investors Get It Wrong
Every property investor talks about rental yield. But most are quoting the wrong number — usually gross yield, which ignores the expenses that eat into your actual return. Here's what you actually need to know.
What is rental yield?
Rental yield measures how much annual rental income a property generates as a percentage of its value. It tells you what return you're getting purely from rent — before capital growth is considered.
Gross yield formula:
(Weekly rent × 52) ÷ Property value × 100 = Gross yield %
Example: $500/week rent, $600,000 property:
($500 × 52) ÷ $600,000 × 100 = 4.33% gross yield
Use our Rental Yield Calculator to do this automatically.
Gross yield vs net yield: the difference that matters
Gross yield ignores the costs of owning the property. Net yield accounts for them.
Net yield formula:
((Annual rent − Annual expenses) ÷ Property value) × 100 = Net yield %
Typical annual expenses on an investment property
| Expense | Typical cost |
|---|---|
| Property management fee | 7–10% of rent collected |
| Council rates | $1,200–$3,000/year |
| Water rates | $800–$1,500/year |
| Landlord insurance | $1,500–$2,500/year |
| Building/strata insurance | $1,000–$3,000/year (houses) |
| Repairs and maintenance | 0.5–1% of property value/year |
| Vacancy allowance | 2–4 weeks/year (1.5–3% of annual rent) |
| Accounting fees | $500–$1,200/year |
On a typical $600,000 property renting for $500/week ($26,000/year), total annual expenses might be:
- Property management (8%): $2,080
- Council + water rates: $2,500
- Insurance: $2,000
- Maintenance allowance (0.7%): $4,200
- Vacancy (2 weeks): $1,000
- Accounting: $800
- Total expenses: ~$12,580
Net annual income: $26,000 − $12,580 = $13,420
Net yield: $13,420 ÷ $600,000 × 100 = 2.24%
Compared to gross yield of 4.33%.
What's a good rental yield in 2026?
By Australian city (approximate 2026 averages)
| City/Region | Typical Gross Yield (Houses) | Typical Gross Yield (Units) |
|---|---|---|
| Sydney | 2.5–3.5% | 3.5–4.5% |
| Melbourne | 2.8–3.8% | 4.0–5.0% |
| Brisbane | 3.5–4.5% | 5.0–6.0% |
| Perth | 4.5–5.5% | 5.5–7.0% |
| Adelaide | 4.0–5.0% | 5.5–6.5% |
| Regional areas | 5.0–8.0%+ | 6.0–9.0%+ |
Note: Yields are approximate and vary significantly by suburb, property type, and condition. These are indicative 2026 figures.
Yield vs capital growth: the trade-off
High yield and high capital growth rarely go together. This is one of the most important trade-offs in property investing.
- Sydney inner suburbs: 2.5% yield but historically strong capital growth. You're paying for growth potential.
- Regional mining towns: 8–10% yields possible, but volatile demand and capital growth is often flat or negative when the boom ends.
- Brisbane outer suburbs: 5–6% yield with reasonable growth — the "balanced" middle ground many investors seek.
Neither is inherently better. It depends on your strategy: cashflow (yield) vs wealth building (capital growth). Most serious investors want a balance: enough yield to service the loan comfortably, plus a market with genuine growth potential.
Positive vs negative gearing
If your rental income exceeds all your expenses including mortgage interest, you're positively geared. The property pays for itself and then some.
If expenses (including mortgage interest) exceed rental income, you're negatively geared. You top up the property each month from your salary. You can claim the loss against your other income, reducing your tax bill.
At current mortgage rates (6.2–6.5% investor rates), a property needs a gross yield of around 6%+ to be positively geared after all expenses. Most Australian capital city properties are negatively geared for investors who bought recently.
Use our Negative Gearing Calculator to model your after-tax cashflow position.
Frequently asked questions
What is a good rental yield in Australia?
A gross rental yield of 4–6% is generally considered solid in Australia. Yields below 3% indicate the property's value is primarily driven by capital growth expectations. Net yield (after expenses) is typically 1.5–2% lower than gross yield.
What is the difference between gross and net rental yield?
Gross yield = (annual rent ÷ property value) × 100. Net yield accounts for expenses like management fees, rates, insurance, repairs, and vacancy. Net yield is typically 1.5–2 percentage points lower than gross yield.
Is 5% rental yield good?
Yes, 5% gross yield is solid for an Australian investment property. After expenses, your net yield would be around 3–3.5% — meaning the property is close to cash-flow neutral. At 5% gross, the property may be positively geared after accounting for depreciation deductions.
Use our Rental Yield Calculator for any property, or the Negative Gearing Calculator to model cashflow after tax.
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