The direct answer
Gross rental yield compares annual rent with property cost. Net rental yield deducts the property expenses specified in the model before using the same cost basis. The difference between the two percentages shows the effect of those modeled expenses, not necessarily every cost an owner will face.
Keep the denominator unchanged
For a useful gross-versus-net comparison, use the same property cost in both ratios. State whether that cost is only the purchase price or includes additional acquisition spending. A property-level yield normally differs from the cash-on-cash measure that uses investor equity. Mixing those denominators can create a misleading apparent improvement when moving from gross to net.
To apply the approach to an editable scenario, use the Rental Yield Calculator. For the neighboring question, explore Cap Rate Calculator.
Define what net includes
The calculator subtracts the annual property expenses supplied by the user from annual rent. It does not automatically determine vacancy, financing or tax treatment. If an income allowance is needed, reflect it in the rent scenario or use a more detailed rental operating model. An expense list should specify management, insurance, maintenance and other owner obligations rather than hiding them in an unexplained total.
Read the gap as an expense relationship
The yield gap equals annual modeled expenses divided by the common cost basis. This helps explain why two properties with equal gross yield can have different net yield. It also provides a sensitivity check: raising expenses reduces net yield while gross yield stays unchanged. Do not infer a future exit price or a complete investment return from either annual percentage.
Worked example
At $450,000 property cost and $36,000 annual rent, gross yield is 8%. Deduct $10,000 annual property expenses for $26,000 net income and 5.78% net yield. The 2.22 percentage-point gap is the $10,000 expense allowance divided by $450,000.
Common mistakes and limitations
A percentage-point difference is not a percentage change. Also, a yield labeled net can mean different expense conventions on different websites; inspect the definition before comparing it.
Net-yield conventions vary. Clearly label which expenses are included and exclude financing unless a distinct leveraged return output is shown.
Frequently asked questions
Does net yield include the loan payment?
Only if you explicitly put it into an expense assumption, which changes the interpretation. For a clear after-debt view, use a cash-flow or cash-on-cash model.
Can net yield exceed gross yield?
With the same denominator and nonnegative expenses, it cannot. Check the income and expense basis if a comparison suggests otherwise.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- IRS — Publication 527 (2025), Residential Rental PropertyRental income and expense concepts; operating/rental expense context.
- Office of the Comptroller of the Currency — Comptroller's Handbook — Commercial Real Estate LendingNOI, direct capitalization, cap-rate valuation and DCF concepts for commercial real estate.
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