Rental yield expresses your annual rental return as a percentage of what the property cost. Our Rental Yield Calculator works it out in two forms — gross and net — and then shows you the cash position on top.
Step 1: Potential annual rental income
Your monthly rent multiplied by 12. This is the rent the property would earn if it were fully occupied all year and every tenant paid on time.
Step 2: Deduct vacancy and bad debt
Two allowances are taken off that figure to give your effective annual rental income:
Vacancy loss — the share of the year the property sits empty. You enter an occupancy rate (95% by default), and the calculator treats the remainder as vacancy.
Bad debt allowance — rent billed but never collected, 2% by default.
Both are calculated on the potential income, not on each other. A 5% vacancy and a 2% bad debt allowance remove 7% of the potential income in total.
Step 3: Add up your annual property expenses
Nine ownership costs are totalled: monthly maintenance fee (multiplied by 12), annual sinking fund, quit rent, assessment tax, fire insurance, property insurance, property management fee, expected maintenance reserve, and miscellaneous expenses.
Step 4: The two yields
Gross rental yield = potential annual rental income divided by purchase price, times 100
Net rental yield = (effective annual rental income minus annual property expenses) divided by purchase price, times 100
A worked example
A RM500,000 property renting at RM2,000 a month, at 95% occupancy with a 2% bad debt allowance:
Potential annual rental income: RM24,000
Less vacancy loss of RM1,200 and bad debt of RM480, giving effective income of RM22,320
Annual property expenses of RM7,400 (RM3,000 maintenance, RM600 sinking fund, RM120 quit rent, RM480 assessment tax, RM300 fire insurance, RM1,200 management fee, RM1,500 maintenance reserve, RM200 miscellaneous)
Net rental income: RM14,920
Gross rental yield: 4.80%
Net rental yield: 2.98%
Your loan instalment is deliberately left out of both yields — see our article on cash flow for why.