This investment property calculator works out the gross and net rental yield of an investment property.

Gross rental yield is a measurement used to compare the potential returns of different properties. Although gross rental yield is probably the most commonly used method, it is pretty crude. It should be treated with caution though it doesn't take into account your monthly running costs.

Formula for Gross Rental Yield is (Monthly rent * 12) / Cost of property = Gross yield

Net rental yield is a much better gauge of potential returns than the gross rental yield. It takes into account the costs of buying and the monthly running costs so is far more accurate.

In the net rental yield formula below, running costs are things like...

Insurance
maintenance
ground rent
service charges
allowance for empty periods (voids). Allowing 10% of rent is normal.
letting agent fees.

Purchase costs:
solicitor fees
valuation
mortgage costs
stamp duty

Formula for Net Rental Yield is ((Monthly rent - running costs) * 12) / (Cost of property + purchase costs) = Net yield