Gross Yield Calculator: Formula and Worked Example
1. Short answer
Gross initial yield is the annual rental income divided by the total investment, expressed as a percentage. It tells you what a property produces before a single cost is deducted.
Gross yield = (annual rent ÷ total investment) × 100%
A property costing £300,000 that produces £18,000 of rent a year has a gross yield of 6.0%. Watch the denominator: it should be the total investment including transfer tax and acquisition costs, not just the purchase price.
2. What gross yield is, and what it is not
Gross yield is a snapshot at purchase. It uses the rent and the investment at the moment you buy, and says nothing about what happens afterwards.
What it does not include:
- no operating costs (maintenance, insurance, management, service charges)
- no vacancy
- no financing: interest and repayment do not appear
- no tax
- no capital growth
That makes gross yield a comparison figure: useful for putting three properties in the same market side by side, unsuitable for deciding whether a project actually works. For that you need net yield and cash flow.
Gross yield is not the same as cap rate. Cap rate divides net operating income by market value; gross yield divides gross rent by the investment. On the same property those give different percentages.
3. The formula, component by component
Numerator: annual rent. Contractual rent over twelve months, excluding service charges. Service charges are a pass-through of costs you incur yourself; counting them as income without booking the matching cost inflates the yield.
Denominator: total investment. This is where it usually goes wrong. Total investment is:
- the purchase price
- plus transfer tax or stamp duty
- plus acquisition costs: notary, land registry, agent, valuation
- plus any initial works needed to make the property lettable
Using the purchase price alone flatters the result. In the Netherlands, where investment property attracts a 10.4% transfer tax plus roughly 2% in other costs, that easily overstates the yield by a full percentage point.
The gross rent multiplier is not its reciprocal. Alongside yield you will meet the gross rent multiplier (GRM, or years' purchase): the purchase price divided by the annual rent, telling you how many years of rent the market pays for the asset. Watch the denominator, because it is a different one. GRM runs on the bare purchase price and gross yield on the total investment. So GRM is the exact inverse of yield on the purchase price, and not of the yield you should be quoting. Two figures that look like mirror images of each other are measuring against two different bases.
4. Worked example
A renovated 75 m² apartment in a mid-sized city, bought as an investment in 2026 and let on the open market. Figures in euros, on Dutch rules.
| Item | Amount |
|---|---|
| Purchase price | € 285,000 |
| Transfer tax (10.4%) | € 29,640 |
| Notary and land registry | € 1,800 |
| Buying agent | € 3,500 |
| Valuation | € 800 |
| Initial works (painting, kitchen) | € 9,000 |
| Total investment | € 329,740 |
| Base rent per month | € 1,475 |
| Annual rent | € 17,700 |
Gross yield = (17,700 ÷ 329,740) × 100% = 5.37%
Using only the purchase price as the denominator would have produced 6.21%, nearly a percentage point higher on exactly the same property. That gap is not a detail: it is the difference between a property that looks worth buying and one that is not.
| Metric | Value | What it means |
|---|---|---|
| Yield on total investment | 5.37% | The honest figure: everything you paid is in it |
| Yield on purchase price only | 6.21% | Flattering, and useless for comparison |
| Difference | 0.84 points | Everything that came on top of the price: € 44,740 |
5. What counts as a good gross yield?
There is no absolute threshold: a yield only means something against comparable properties in the same market and segment. As rough guidance for Dutch residential investments in 2026:
| Range | What it usually signals |
|---|---|
| below 4.5% | Large cities and prime stock; you are buying capital growth, not cash flow |
| 4.5% – 6% | Typical for open-market residential investment |
| 6% – 8% | Mid-sized cities, older stock, or more hands-on work |
| above 8% | Rarely free: deferred maintenance, weak location or tenant risk |
A high yield is not a quality verdict. It raises the follow-up question: why is this return high, and what risk are you being paid for?
6. Three mistakes that distort the number
The denominator is only the purchase price. By far the most common error, and the most expensive. See the worked example above.
Rent includes service charges. That counts costs you pass on as if they were income. Always use base rent. On a furnished or all-inclusive letting the monthly figure can carry a substantial pass-through for utilities and cleaning, and folding that into the numerator can lift the quoted yield by the better part of a percentage point. Not one cent of it stays with you.
Gross yield is used as a decision figure. Two properties with the same gross yield can behave completely differently once maintenance, service charges, vacancy and financing are included. Gross yield starts the analysis; it does not finish it.
7. Run your own numbers
Enter your own figures above and the yield updates as you type. For net yield, monthly cash flow, DSCR and the effect of financing, the BRIX Calc rental calculator models the whole project, including multi-year operation and rent indexation.
8. Frequently asked questions
Should transfer tax be part of the calculation?
Yes, in the denominator. Transfer tax is money you spend to own the property, so it belongs in the total investment. Leaving it out overstates the yield on Dutch investment property by roughly a full percentage point.
What is the difference between gross and net yield?
Gross yield divides gross rent by the investment; net yield deducts operating costs from the rent first. Net yield is therefore always lower and is the fairer measure of whether a property performs. The gap between the two is exactly what the property costs you to own each year.
Does vacancy count in gross yield?
No. The numerator is contracted rent over a full twelve months, with every payment arriving on time. That is what makes it a gross measure. Two separate haircuts come off it later: a void allowance, for rent you miss because nobody is living there, and an allowance for arrears or bad debt, for rent you miss while somebody is. They are different risks and they stack, so folding them into one percentage usually understates the second. Neither touches gross yield; both land in net yield.
How does gross yield relate to the gross rent multiplier?
The GRM is the purchase price divided by annual rent, and it is the exact inverse of gross yield calculated on the purchase price. It is not the inverse of gross yield on total investment, because that has a larger denominator underneath it. If you see both quoted side by side, establish which basis each one uses before you try to reconcile them.
Is a 6% gross yield good?
In most Dutch residential markets in 2026, 6% is typical to slightly above average. Whether it is good depends on risk: 6% on a well-maintained apartment in a city with strong rental demand is a very different proposition from 6% on a dated property with a fragile tenant.
Can gross yield be used to set a sale price?
Indirectly. If comparable properties trade at a 5.5% gross yield, that implies what buyers will pay for your rental income. Use annual base rent, and remember a buyer will put their own acquisition costs in the denominator.
Why does my yield differ from the agent's?
Almost always the denominator. Selling parties often calculate yield on the purchase price rather than total investment, which raises the figure optically. Always ask which items are in the denominator before comparing two percentages.