Ask most property owners what their rental property returns and you will hear a gross figure: annual rent divided by purchase price. It is a useful starting point and an incomplete one.
The deductions that matter
Property tax, society maintenance, repairs, insurance, brokerage on re-letting and management effort all reduce the return. So does vacancy: a property empty for one month a year loses over 8% of gross rent before any other cost.
Net yield after these deductions is frequently 1 to 2 percentage points below gross, which changes the comparison against other assets considerably.
Value the denominator honestly
Yield should be measured against current indicative market value, not against the price you paid. A property bought years ago may show an attractive yield on cost while returning very little on the capital currently locked in it.
Then compare like with like
Once you have a net yield on current value, you can compare it with other assets on returns, liquidity, effort and divisibility. That comparison — not appreciation stories — is what should drive hold, buy and sell decisions.
This article is educational in nature and does not constitute investment, tax or legal advice. Please consider your own circumstances and seek professional guidance before acting.