Key takeaways:
Rental yield measures rental income relative to property value. Gross yield uses rental income before property expenses, while net yield accounts for specified ongoing costs.
There is no single "good" rental yield in Australia. Useful benchmarks vary by location, property type, value, achievable rent and local rental conditions.
A higher rental yield is not necessarily a better investment. Property expenses, vacancy, financing costs and capital growth can change the broader financial picture.
Compare properties using consistent figures. Use the same yield calculation and expense categories, and consider comparable properties within the same local market.
Rental income may contribute to borrowing power. How much lenders recognise varies according to lender policy, the property and your financial circumstances.
Rental yield measures the rental income an investment property generates relative to its value or purchase price, expressed as a percentage. It can help you compare the income potential of different properties, but it is only one part of assessing an investment.
There are two main types of rental yield: gross rental yield, which measures rental income before property expenses, and net rental yield, which accounts for certain ongoing property costs. There is no single benchmark for a "good" rental yield, as yields vary by location, property type, price and market conditions.
Alongside rental yield, consider costs such as property management, maintenance, insurance, rates, potential vacancies and financing, as well as the property's potential for capital growth.
This guide explains how to calculate rental yield, the difference between gross and net yield, Australian rental yield benchmarks and what to consider when comparing investment properties.
What is rental yield?
Rental yield measures the rental income a property generates relative to its value or purchase price, expressed as a percentage. It can help investors compare the income potential of properties with different prices, rather than comparing rent alone.
There are two main types of rental yield:
Type | What it measures |
|---|---|
Gross rental yield | Rental income before property-related expenses. |
Net rental yield | Rental income after specified property-related expenses. |
Gross rental yield provides a simple comparison before expenses, while net rental yield accounts for certain ongoing property costs and gives a more detailed view of the rental income retained after those expenses.
Rental yield is different from profit or total investment return. Property expenses, financing costs, vacancies and changes in the property's value can all affect the overall financial outcome of an investment property.
How do you calculate rental yield?
How you calculate rental yield depends on whether you're measuring gross rental yield or net rental yield. Gross yield uses rental income before property expenses, while net yield deducts specified property expenses.
How to calculate gross rental yield
To calculate gross rental yield, divide the property's annual rental income by its value or purchase price, then multiply by 100.
Gross rental yield = (annual rental income ÷ property value) × 100
For example, consider a property purchased for $950,000 and rented for $500 per week:
Weekly rent: $500
Annual rental income: $500 × 52 = $26,000
Property value: $950,000
Calculation: ($26,000 ÷ $950,000) × 100
Gross rental yield: 2.74%
Gross rental yield provides a quick way to compare rental income against property value before expenses.
How to calculate net rental yield
Net rental yield accounts for specified property expenses, providing a clearer measure of the rental income retained after those costs.
Net rental yield = [(annual rental income − annual property expenses) ÷ property value] × 100
Using the same property, assume annual rent is $26,000 and annual property expenses total $4,000:
Annual rental income: $26,000
Annual property expenses: $4,000
Income after these expenses: $26,000 − $4,000 = $22,000
Property value: $950,000
Calculation: ($22,000 ÷ $950,000) × 100
Net rental yield: 2.32%
In this example, accounting for $4,000 in property expenses reduces the rental yield from 2.74% gross to 2.32% net. Actual expenses vary by property, so include the relevant costs when calculating net yield.
These examples are illustrative only and do not represent typical Australian property prices, rents or expenses.
What expenses affect net rental yield?
Net rental yield accounts for specific property expenses that reduce the rental income retained from an investment property.
Depending on the property and calculation method, expenses may include:
Property management fees: Costs for managing the property and tenancy.
Council rates: Charges levied by the local council.
Strata or body corporate fees: Ongoing fees that may apply to strata-titled properties.
Insurance: Relevant premiums for the investment property.
Maintenance and repairs: Costs to maintain the property and complete repairs.
Water charges: Water costs payable by the property owner.
Other recurring expenses: Additional ongoing costs specific to the property.
Depreciation differs from these out-of-pocket costs. It generally reflects the decline in value of eligible assets over time rather than a recurring cash expense. For a cash-based net yield comparison, do not treat depreciation as an out-of-pocket operating cost. Tax treatment is separate.
There is no single standard method for calculating net rental yield, and the expenses included can vary. When comparing properties, use a consistent calculation and the same expense categories to make the yields more meaningful.
For a broader breakdown of costs to budget for, see our guide to investment property costs.
What is a good rental yield in Australia?
There is no single percentage that defines a good rental yield in Australia. A useful benchmark depends on the property and the market you're comparing it with.
Key factors include:
Location: Property values and rents vary between cities, regions and suburbs.
Property type: Houses, apartments and other property types can have different values, rents and ongoing costs.
Property value: Because yield measures rent relative to property value, the price paid can significantly affect the result.
Achievable rent: The rent a property can reasonably attract directly affects its gross rental yield.
Local rental conditions: Vacancy rates, rental demand and supply can influence achievable rents.
As at August 2026, Cotality reported Australia’s gross dwelling rental yield at 3.79%.
Gross dwelling rental yield, August 2026
Gross rental yields can vary considerably between capital cities, reflecting differences in property values and rents. When comparing a property's yield with a city-wide benchmark, remember results can also vary by suburb and property type.
Market | Gross rental yield* |
|---|---|
3.3% | |
4.0% | |
3.4% | |
3.6% | |
3.9% | |
4.4% | |
4.3% | |
6.3% | |
3.79% |
Market benchmarks only. Yields vary by suburb, property type and calculation method.
Source: Cotality, August 2026. Gross dwelling rental yields.
Capital city vs regional rental yields
Rental yields can also differ between capital-city and regional markets. The figures supplied for this article show a 4.3% combined regional gross rental yield, compared with 3.6% across the combined capitals.
These averages do not mean an individual regional property will necessarily generate a higher rental yield than a capital-city property. Property values, achievable rents and rental conditions vary considerably between individual markets.
Rental conditions can provide additional context when assessing yield. For example, Cotality reported annual rental growth of 5.9% nationally in July 2026, although rental conditions vary between individual markets.
For investors, rental yield benchmarks are most useful as comparison points, not targets. Consider the property's gross and net yield alongside its ongoing costs, vacancy risk, financing costs and other factors relevant to the investment.
Is a higher rental yield always better?
Not necessarily. A higher rental yield means a property generates more rental income relative to its value, but the headline percentage does not show the full financial picture.
A property may have a relatively high gross rental yield, but its net rental yield may be lower once you account for ongoing expenses and periods without rental income.
When comparing rental yields, consider:
Ongoing expenses: Property management fees, rates, insurance and other costs reduce the rental income retained.
Vacancy risk: Periods without a tenant reduce annual rental income.
Maintenance: Repairs and upkeep add to ownership costs.
Financing costs: Interest and other borrowing costs can affect cash flow.
Tenant demand: Local demand can affect vacancy periods and achievable rent.
Property condition: Older or poorly maintained properties may require more spending on repairs and maintenance.
Investment objectives: The importance of rental income, capital growth and other factors will vary between investors.
Remember, rental yield is one measure of an investment property, not a complete assessment. Capital growth (the change in a property's value over time) is another factor investors may consider alongside rental income, costs and their investment objectives.
Rental yield vs capital growth
Rental yield and capital growth measure different aspects of an investment property. Rental yield measures rental income relative to the property's value or purchase price, while capital growth is the increase in a property's value over time.
Rental yield | Capital growth | |
|---|---|---|
Measures | Rental income relative to property value | Change in property value |
Realised through | Rent received from the property | An increase in value, which may be realised if the property is sold |
Can change over time? | Yes | Yes |
A property may perform differently on each measure because rents and property values do not necessarily move at the same rate. For example, a property could have a comparatively high rental yield but lower capital growth, or increase in value while producing a comparatively lower rental yield.
Investors may consider both rental yield and capital growth based on their objectives, financial circumstances and investment timeframe.
Neither future rental income nor capital growth is guaranteed, and past or current performance is not an indication of future results.
How do the negative gearing changes affect property investors?
Negative gearing generally occurs when the deductible costs of owning a rental property exceed the assessable rental income it generates. From 1 July 2027, new rules will limit negative gearing for some residential property investments.
How the changes apply depends largely on when the property was acquired and whether it qualifies for an exemption:
Properties held before 7:30 PM AEST on 12 May 2026: Existing negative gearing arrangements are generally grandfathered until the property is sold.
Established residential properties acquired after 7:30 PM AEST on 12 May 2026: From 1 July 2027, eligible losses generally cannot be deducted against non-residential income, such as wages. Losses can instead be deducted against residential property income, including relevant capital gains, with excess losses carried forward.
Eligible new builds: Negative gearing will remain available, subject to the applicable rules. The government was still consulting on aspects of the new-build definition and other exemptions.
The reforms do not change how gross or net rental yield is calculated. However, they may affect the after-tax cost of holding an investment property, so consider rental yield and tax treatment separately.
The rules are detailed, and their impact will depend on your circumstances. See Aussie's guide to the 2026 negative gearing and CGT changes for more information, and consider seeking independent taxation advice before making an investment decision.
You might also be interested in: 2026 Federal Budget: What borrowers need to know
How does rental income affect borrowing power?
Rental income may boost your borrowing power when applying for an investment home loan, but lenders may assess it differently from other income.
Lenders generally require evidence of rental income, such as a lease agreement, bank statements or tax returns. They may also recognise only a portion of verified rental income, under their own serviceability policy when assessing serviceability to account for property expenses and potential vacancies.
The amount recognised varies by lender, property and borrower circumstances.
Rental income is only one part of the assessment. Your borrowing power can also be affected by:
Your income: Salary and other eligible income can contribute to your capacity to repay a loan.
Living expenses: Household and personal expenses affect the income available for repayments.
Existing debts: Home loans, debts, credit cards and other liabilities can reduce borrowing capacity.
Other financial commitments: Ongoing commitments can affect your capacity to service a new loan.
Lender policy: Credit criteria and serviceability calculations vary between lenders.
An Aussie Broker can help you understand how participating lenders may assess your rental income alongside your broader financial position and compare investment home loan options. Lending criteria, terms and conditions apply.
How to improve your rental yield
Improving rental yield means increasing rental income, managing ongoing costs and reducing avoidable vacancy. Any changes should reflect the property, local rental market and applicable tenancy laws. Here are six areas to consider:
Compare local rents: Check what similar properties in the area are renting for, including their location, condition and features. This can help you assess whether the current rent reflects the local market. Any rent increase must comply with applicable state or territory tenancy laws.
Check vacancy rates and rental demand: Research local vacancy rates and how quickly comparable properties are being leased. Higher vacancy can reduce annual rental income and affect your overall yield.
Understand local tenant demand: Identify which property features renters value in the local market. Avoid assuming upgrades such as parking, pet-friendly features or energy-efficient improvements will automatically support higher rent.
Review recurring property costs: Check property management fees, strata or body corporate fees, insurance, maintenance and other recurring expenses. Reducing unnecessary costs may improve net rental yield without compromising appropriate maintenance or property management.
Assess upgrades before spending: Compare the cost of renovations or improvements with any realistic rent increase. Higher spending does not guarantee higher rental income, so consider whether an upgrade addresses demonstrated local demand.
Reduce avoidable vacancy: Plan for lease expiries, keep the property appropriately maintained and monitor local rental conditions. Reducing gaps between tenancies can help protect annual rental income.
There is no single way to improve rental yield across every investment property. Start by reviewing the actual rent, expenses and vacancy history, then assess which changes are practical for the local market.
Do apartments or houses have higher rental yields?
Neither apartments nor houses automatically have a higher rental yield. Yield depends on the relationship between a property's value, the rent it generates and, for net yield, its ongoing costs. When comparing houses and apartments, consider:
Purchase price: Properties earning similar rent can have different yields if their purchase prices differ.
Achievable rent: Size, condition, features and local demand can affect rental income.
Location: Rental yields can vary between cities, suburbs and individual properties.
Tenant demand: Local demand can affect achievable rent and vacancy periods.
Rental supply: The number of comparable properties available can influence local rental conditions.
Strata or body corporate fees: These may apply to apartments and other strata-titled properties, reducing net rental yield.
Maintenance costs: Ongoing maintenance requirements and costs can differ between properties.
Property features: Bedrooms, parking, outdoor space and amenities may influence rent and tenant demand, depending on the local market.
For example, an apartment with a lower purchase price could have a higher gross rental yield than a nearby house if their rents are relatively similar. However, strata fees and other expenses could narrow the difference in net rental yield. The reverse may also occur.
Rather than assuming one property type offers a higher rental yield, compare the purchase price, achievable rent, vacancy risk and ongoing costs of individual properties in the same market.
Look beyond rental yield when financing an investment property
Rental yield can help you compare the rental income a property generates relative to its value, but it does not provide a complete picture on its own. Gross and net yield can be useful reference points when researching properties, particularly when you compare them consistently within the same market.
Before making an investment decision, you may also need to consider property expenses, vacancy, financing costs, borrowing capacity, tax implications and your broader financial objectives. Rental income and capital growth can also change over time, so don't treat current yields as a guarantee of future performance.
If you're considering financing an investment property, an Aussie Broker can help you understand your borrowing capacity, how participating lenders may assess rental income and the investment home loan options available based on your circumstances.
