Gross Yield

What is gross yield?

Gross yield (also called gross rental yield) is the simplest income metric in real estate: one year of rent divided by the purchase price. Because it ignores every expense, it is not a measure of profit, it is a fast filter for comparing how "rent-rich" different properties or markets are before doing deeper analysis.

Typical gross yields in the U.S. range from 4% to 6% in expensive coastal markets to 8% to 12% in lower-priced Midwest and Southern markets. As a rule of thumb, once you subtract operating expenses (often 35% to 50% of rent) the net figure lands well below the gross, so a 10% gross yield might translate to a 5% to 6.5% cap rate.

Gross yield is the inverse of the gross rent multiplier (GRM): a GRM of 12.5 equals a gross yield of 8%. Both are screening tools, use them to shortlist candidates, then underwrite with NOI, cap rate, and cash flow before buying.

Worked example

A property listed at $150,000 rents for $1,250 per month, or $15,000 per year. Gross yield = $15,000 ÷ $150,000 = 10%. After roughly 45% of rent goes to operating expenses, the implied cap rate is closer to 5.5%.

Frequently asked questions

What is the difference between gross yield and net yield?

Gross yield divides raw annual rent by the price and ignores costs. Net yield (essentially cap rate) subtracts operating expenses like taxes, insurance, management, maintenance, and vacancy first. Gross yield is fine for a first-pass screen across many listings, but only a net figure tells you whether a property actually makes money.

Why do cheaper markets have higher gross yields?

Rents do not fall as fast as prices across markets, a $100,000 house may rent for $1,000 a month while a $1,000,000 house rents for $4,000, not $10,000. Lower-priced markets therefore show higher yields, but they often come with slower appreciation, older housing stock, and higher maintenance and turnover as a share of rent, so high gross yield is not free money.

Related tools and guides

• Rental Property Calculator