What Is a Good Rental Yield? A Guide for Australian Investors

What is a Good Rental Yield? A Guide for Aussie Investors

A good rental yield in Australia generally falls somewhere between 5% and 8% - before taxes and other expenses get factored in. The actual target yield for you will depend on your specific investment goals, the type of property youre looking to buy, and where it is.

Figuring out a good rental yield is up there as one of the most important metrics when evaluating a rental property. Every property investor should understand it inside out.

Understanding Rental Yield

Rental yield is a pretty straightforward measure - basically it tells you what percentage of the purchase price or current value of a property you can expect to take home in the way of rental income each year. For anyone who's serious about property investing, the higher the yield the better - because that means your investment is giving you a solid stream of cash every month.

But here's the thing - a lower rental yield isn't always a bad thing. In fact, sometimes it's worth putting up with a lower yield if you think the property is going to increase in market value over time, and that increase will more than make up for the lower yield.

There are also two types of rental yield to consider: gross rental yield and net rental yield.

Gross Rental Yield - How Property Investors Measure Returns

Understanding How to Calculate Gross Rental Yield

When working out gross rental yield, you need to know your annual rental income and the property value.

Gross Rental Yield Formula = Annual Rental Income / Property Value * 100

For instance, if you've got a $500,000 investment property in Brisbane that's pulling in $500 a week in weekly rent, here's how you'd work it out:

• Annual rental income: that's $500 per week x 52 weeks in a year, which equals $26,000
• Gross rental yield: so it's $26,000 divided by $500,000 - which gives you 5.2%

Gross yield is a helpful number for comparing different properties. But - and this is a big but - it doesn't factor in the ongoing costs like property management fees, council rates, strata fees or insurance.

What Gross Rental Yield Tells You About a Property

If you're looking at a gross rental yield of 6% or above, that suggests the property is generating a pretty healthy income compared to what it's worth in the market. But here's the thing - gross yield alone doesn't give you the full picture of the costs involved.

How to Calculate Net Rental Yield

Why Annual Rental Expenses Are Vital To Get Right

Net rental yield paints a more realistic picture once you've subtracted annual expenses - the annual rental costs can really eat into what you thought was a decent return.

Net Rental Yield = ((Annual Rental Income minus Annual Expenses) / Property Value) x 100

Take that same $500,000 investment property we've been using as an example:

• Annual rental income: $26,000
• Annual expenses: property management fees ($2,340), council rates ($1,800), insurance ($1,200) and ongoing costs for maintenance ($1,000) = $6,340 - that's where the real costs add up
• Net rental yield: (($26,000 - $6,340) / $500,000) x 100 works out to 3.93%

That's a significant gap from the 5.2% gross yield. Always calculate net rental yield before making investing decisions - it's what actually matters for your financial situation.

How Expenses Can Knock Net Yield Off Track Over Time

Net yield changes in response to shifts in property value and ongoing expenses. If property prices rise but you're still charging the same rent, your yield is going to get squeezed.

The key is tracking your net rental yield from one year to the next and comparing it to similar properties in the same suburb. Then you'll know if you've got a rental property that's underperforming.

Use our free rental yield calculator to run these numbers any time you like.

What is a Good Rental Yield In Australia?

A good rental yield in Australia depends on several factors - your financial situation, how much income you need, and what your long-term property investment goals look like.

Yield Range	The Bottom Line
Below 3% gross	Low rental yield - unless you're in it for the long haul and capital growth
3% - 5% gross	Average - typical in capital cities like Sydney
5% - 8% gross	Good rental yield - a decent balance between income and growth
Above 8% gross	High rental yield - but check for investment risk

Good Rental Yield Benchmarks Around the Country

Most property investors reckon that 5% gross is the bare minimum to make a good investment worth considering - but what counts as a good rental yield really varies by market.

In the capital cities, places like Sydney tend to have houses with pretty lower yields (around 3-4%) but they do offer capital growth over time. Regional areas are a different story - you can get much higher rental returns (6-10%) because property prices are lower and consistent demand from tenants keeps the market ticking along. Plenty of property investors are targeting these areas for the stronger cash flow.

Good Rental Yield by Investment Property Type

Why Units Tend to Offer Higher Rental Returns

Units tend to do a lot better than houses in the same suburb when it comes to rental returns. That's because units tend to be priced lower relative to the money they bring in each week, which gives you stronger cash flow overall.

Run the numbers: a $400,000 unit that pulls in $450 per week has a gross rental yield of around 5.85%. Now compare that to a $700,000 house in the same suburb which is earning $600 a week - that only gives you a return of 4.46%.

Units tend to attract tenants looking for affordable housing near amenities, which helps keep demand up and vacancy rates pretty low.

Houses and Capital Growth - A Different Story

Houses typically produce lower yields but they do offer capital growth over time. And that's largely because of the land value in houses - especially in areas where the population is growing and there's strong demand.

Property investing for long-term wealth often means choosing houses over units with higher yields. If you need regular income and steady cash flow, high rental yield units tend to be the better fit. If you can handle the ongoing costs and expenses while waiting for capital growth, houses offer higher rental returns over the longer term through appreciation.

High Rental Yield Suburbs and Regional Areas

Where Property Investors Find Higher Rental Returns

In capital cities, expect gross rental yields between 3% and 5%. Properties near hospitals, universities, and transport hubs produce better rental returns because tenants value convenience. Check property reports for vacancy data before buying.

Regional areas can deliver higher yields - 7% to 10% or more. Towns with mining, agriculture, or defence industries have strong demand and limited housing supply, which pushes what tenants pay higher relative to property prices.

But there's a trade-off: higher yields in regional areas can come with higher vacancy rates and less value growth.

Factors Behind High Rental Demand

Several factors drive higher rental returns in a given market:

• Population growth and net migration to the area
• Infrastructure spending on roads, transport, and hospitals
• Proximity to employment and major employers
• Limited property supply within the same suburb
• Consistent demand from tenants - students, defence personnel, FIFO workers

Properties in areas with strong demand offer higher rental returns and lower vacancy rates.

Is a High Rental Yield Always a Good Investment?

Not always. Very high yields can signal investment risk. A remote mining property might return 10% gross, but if the mine closes, the current value could drop dramatically.

Balancing Good Rental Returns with Capital Growth

The best properties balance good rental yield with steady value appreciation.

Here's a simple way to think about it: a property returning 5% yield plus 5% annual income from growth outperforms one yielding 9% with zero growth. Every time.

Consider what kind of property investment approach works for you:

• Cash flow focused - target high rental yield (6%+) for stronger cash flow
• Growth focused - accept lower yields (3%-4%) in areas with capital growth potential
• Balanced investing - aim for 5%-6% in markets with moderate growth

How Negative Gearing Affects Annual Income

When your investment property expenses exceed your rental income, negative gearing lets you offset the loss against your annual income. This strategy works best when the property offers strong long-term growth potential.

Use our negative gearing calculator to model the impact. The ATO provides guidance on declaring rental income and claiming property expenses at tax time.

How to Find Properties With Good Rental Yields

How Much Income Can You Expect?

Before buying an investment property, research how much income comparable properties generate. Check property reports from local agents and use our rental yield calculator to estimate gross and net yield based on the purchase price.

What Makes a Good Investment Property for Yield

Look for investment property options with low vacancy rates, reasonable property management costs, and market value that hasn't been inflated beyond what the local market supports. The best properties sit in suburbs where tenants compete for limited supply.

Learn how to calculate rental yield step by step, or see how yield fits into your broader cash flow analysis.

Track Your Investment Property Rental Yield With PropBoss

Calculating rental yield across your portfolio shouldn't require a spreadsheet. PropBoss tracks rental income, property management costs, and current value so you always know your actual gross and net rental yield. Understanding rental yield is one of the most important metrics to stay on top of. For a deeper look, see our best rental yield suburbs in Australia.

Get started with PropBoss - it's free for your first property.