Net Annual Rent ÷ Current Market Value
Net Annual Rent is the total rent revenue collected minus all expenses (see below). Current Market Value is the appraised or estimated value based on comparable properties (comps). Also referred to as Net Rental Yield, this metric helps rental property investors understand the expected performance of a rental property relative to other investments on a net income basis.
- Mortgage interest
- Property management
- Uncollectible rent
If you own a single family rental property worth $100,000 with $10,000 per year in gross rent (total rent) and $6,000 per year in expenses: your net yield is 4%.