If you’re thinking about buying an investment property, you’ve probably heard people talk about rent yield. But what exactly does it mean—and why does it matter? Here we break down what rent yield is, how to calculate it, and why it’s one of the most important numbers to know before you invest.

What is Rent Yield?

Rent yield is a way of measuring how much income a property generates compared to its value. In simple terms, it tells you how hard your money is working.

There are two types of rent yield:

1. Gross Yield – a quick snapshot of rental return, without factoring in expenses.
2. Net Yield – a more accurate figure that accounts for costs like rates, insurance, and maintenance.

Understanding both helps you compare properties and decide whether an investment is likely to deliver the returns you expect.

How to calculate gross rent yield

Gross yield is the easier calculation and a good place to start.

Formula: Gross Yield (%) = (Annual Rent / Property Value) x 100

Example:

• Purchase Price: $600,000
• Weekly Rent: $650

First, calculate annual rent:
$650 x 52 = $33,800

Then work out the gross yield:
($33,800 / $600,000) x 100 = 5.63%

This means, before expenses, your investment is returning 5.63% of its value each year in rental income.

How to calculate net rent yield

Net yield gives you a clearer picture of actual returns, because it factors in expenses like:

• Council rates
• Water costs
• Insurance premiums
• Property management fees
• Maintenance and repairs

Formula:

Net Yield (%) = ((Annual Rent – Annual Expenses) / Property Value) x 100

Example:

• Annual Rent: $33,800
• Annual Expenses: $5,800

Net Income: $33,800 – $5,800 = $28,000

Net Yield:
($28,000 / $600,000) x 100 = 4.66%

This is the more realistic figure you’ll want to base your investment decisions on.

Why rent yield matters

A property’s rent yield helps you:
✅ Compare different investment options
✅ Understand cash flow potential
✅ Evaluate whether returns are worth the risk
✅ Plan your finances and repayments

Remember, a higher yield can mean better cash flow, but may also reflect higher risks (like vacancy or maintenance). It’s also worth noting that while understanding your rental yield is a great starting point, it is just one piece of the puzzle — you’ll also need to weigh it against your mortgage repayments and interest rates to see if the investment stacks up. This is where working through the numbers with your accountant becomes invaluable.

What is considered a ‘good’ rent yield?

A reasonable rent yield in New Zealand typically falls between 4-6%. Anything above this would be considered a high yield. However, while yield is important, it’s not the only thing to look at.

Make sure you also consider:

• Capital growth potential – Will the property value increase over time?
• Tenant demand – Is there strong rental demand in the area?
• Future development – Could new infrastructure impact value or rentability?
• Tax implications – Speak with your accountant or advisor.

Final tips

Before you buy:

• Always get independent financial advice
• Research comparable rents in the area
• Factor in unexpected costs—repairs, vacancies, interest rate changes

With a clear understanding of rent yields, you’ll be in a stronger position to make smart, confident investment decisions.

Thinking of investing?

If you’d like help finding a property with investment potential, our team is here to guide you. Contact us today for expert advice and local insights.