Glossary / Property

Net rental yield

Net rental yield is annual rent minus every running cost, divided by the purchase price plus every acquisition cost, which makes it the only yield figure that describes money actually reaching the owner.

The numerator drops service charges, management, maintenance, insurance and a vacancy allowance. The denominator adds the transfer fee, agency commission and VAT, trustee and administrative charges, and any mortgage registration fee.

Both adjustments push in the same direction, which is why the net figure sits so far below the gross one.

Where people get it wrong

Deducting the costs but forgetting to add the acquisition costs to the denominator. That flatters the answer by roughly the same amount again.

The framework behind it Net rental yield sets out the rule, the arithmetic and where it breaks.

Read the framework

Related terms

Gross rental yield Gross rental yield is annual rent divided by the purchase price, expressed as a percentage, before any running cost or acquisition cost is deducted. Service charge A service charge is the annual fee an apartment owner pays the owners association for maintaining shared parts of the building, quoted in Dubai as dirhams per square foot per year and levied whether or not the unit is occupied. Void period A void period is time during which a rental property has no paying tenant, and it is a cost rather than an absence of income because the service charge, mortgage and maintenance continue throughout.

Investments Playbook publishes educational research and general information. Nothing on this site is personal investment advice, a solicitation, or a recommendation to buy or sell any asset. Property and securities can fall in value. Past performance does not predict future returns. Figures shown are indicative and may be delayed. Always take regulated professional advice before acting.