Gross yield vs. net yield
Gross yield is annual rent divided by property price. It is fast and useful for a first screen, but it ignores every cost of ownership, so it always flatters a property. A listing advertising an "8% yield" is almost always quoting gross. Net yield subtracts operating expenses — property taxes, insurance, management fees, maintenance, and vacancy — before dividing by price, giving a far more honest picture of what you will actually earn.
The gap between gross and net is often larger than new investors expect. Operating expenses commonly consume 30–50% of gross rent, so a 9% gross yield can easily become a 5% net yield once reality sets in. When you compare properties, always compare like with like, and lean on net yield for real decisions.
What counts as a good yield
There is no universal target, because yield trades off against growth and risk. High-cost coastal markets often deliver low yields (3–5%) because buyers expect price appreciation to make up the difference. Secondary and Midwestern markets frequently offer higher yields (7–10%) with more modest appreciation. Neither is inherently better; they simply reward different strategies.
Treat yield as a starting filter, not a final verdict. A high yield can signal genuine opportunity or hidden risk — deferred maintenance, a declining neighborhood, or unrealistic rent assumptions. Pair the yield figure with cap rate and cash-on-cash return, and always underwrite expenses conservatively rather than trusting a seller's optimistic pro forma.