I’ve analyzed hundreds of rental properties, and one question keeps coming up: what makes a rental yield actually good?
You’re probably tired of vague advice that doesn’t give you real numbers. Here’s the truth: most investors focus on the wrong metrics and end up disappointed with their returns.
Some chase high percentages without knowing the risks. Others accept low yields without knowing they’re leaving money on the table.
I’m going to break down the exact benchmarks that separate winning investments from mediocre ones.
Let me walk you through both calculations so you can run the numbers on any property you’re considering. But before you can calculate anything, you need to know what rental yield actually is.
What is Rental Yield?
Think of rental yield as your property’s report card. It tells you how much income your investment generates compared to what you paid for it.
It’s a percentage; higher indicates better property performance. Earning $1,500/month on a $200,000 property shows if that’s good or just okay.
And yes, location matters; a solid yield in Kansas City differs from one in San Francisco. The beauty of this metric is it works everywhere, whether investing in Cleveland or Charlotte, with consistent math.
Rental yield gives you a clear snapshot without complicated spreadsheets. It’s the fastest way to compare properties side by side and spot which deals make financial sense.
Once you calculate it, you’ll never look at rental listings the same way. Calculate it, you’ll never look at rental listings the same way.
Rental Yield Calculation Guide
Knowing rental yields is essential for evaluating any investment property. Here are both calculations you need to run the numbers on any property you’re considering.
Gross Rental Yield Formula
Here’s the simple formula:
Gross Rental Yield = (Annual Rental Income ÷ Property Value) × 100
Example: You buy a $200,000 property and rent it for $1,500/month.
- Annual rent = $1,500 × 12 = $18,000
- Gross yield = ($18,000 ÷ $200,000) × 100 = 9%
Net Rental Yield Formula
This requires more math, but it’s worth it:
Net Rental Yield = [(Annual Rental Income – Annual Expenses) ÷ Property Value] × 100
Using the same $200,000 property:
- Annual rent = $18,000
- Annual expenses (property tax, insurance, maintenance, vacancy, management) = $5,400
- Net income = $18,000 – $5,400 = $12,600
- Net yield = ($12,600 ÷ $200,000) × 100 = 6.3%
Notice the difference?
That 2.7% gap is why you can’t rely on gross yield alone. Now, let’s talk about which numbers you should actually aim for.
What is Considered a Good Rental Yield in the US?
Here’s what I’ve learned from tracking markets across the country:
The average gross rental yield in the United States stands at 6.51% as of Q3 2025, up from 6.10% in Q3 2024. This national figure masks significant regional variation.
- A gross rental yield of 8-12% is considered good for cash flow markets. Anything above 10% catches my attention as a potential source of immediate income.
- A net rental yield of 5-8% is solid. If you’re consistently hitting 6% or higher after expenses, you’re doing well.
Anything below 5% net yield means you’re either in an appreciation play (like San Francisco or New York) or you overpaid.
Why Location Changes Everything?
Rental yields vary wildly by market. Here’s what I’m seeing in 2025:
| Market Type | Gross Yield Range | Net Yield Range | Top Cities (2025) | Key Characteristics |
|---|---|---|---|---|
| High-Yield Markets (Midwest, South) | 10-22% | 7-15% | • Detroit (21.95%) • Cleveland (16.59%) |
Lower property prices, decent rents, strong cash flow |
| Medium-Yield Markets (Sun Belt, Secondary Cities) | 7-11% | 5-8% | • Dallas (10.42%) • Charlotte |
Balanced appreciation and cash flow |
| Low-Yield Markets (Coastal Metros) | 3-5% | 2-4% | • San Francisco (4.47%) • Seattle (4.63%) |
High property prices, appreciation-focused |
The Midwest has seen a significant rebound in 2025, with rent growth hitting 6.1% year-over-year, double last year’s pace.
Meanwhile, high-cost coastal markets continue to see rental income lag behind property values. I’ve seen investors succeed in all three categories.
The key is matching your strategy to the market. Now, let me show you what factors actually move these numbers.
Factors That Impact Your Rental Yield
Several variables can push your yield up or down by several percentage points. Let me walk you through the main ones.
1. Property Price vs Rent Ratio
The most significant factor is simple: expensive properties in expensive areas typically have lower yields.
A $500,000 home might rent for $2,500/month (6% gross yield), while a $150,000 property could rent for $1,200/month (9.6% gross yield).
2. Operating Expenses
On average, your expenses will eat up 30-50% of your rental income. Here’s the typical breakdown:
| Expense Type | Annual Cost Range |
|---|---|
| Property taxes | 1-3% of property value |
| Insurance | $800-$2,000/year |
| Maintenance | 1% of property value |
| Property management | 8-10% of the monthly rent |
| Vacancy reserve | 5-8% of annual rent |
Older properties cost more to maintain. HOA fees add another layer of expenses.
3. Financing Costs
If you’re using a mortgage, your yield calculation changes. You might hear terms like “cash-on-cash return” (return on your actual invested capital) instead of yield on the full property value.
A highly leveraged property with a 5% net yield might deliver a 15% cash-on-cash return if you only put 20% down.
4. Market Conditions
Rent growth, vacancy rates, and local economic trends all affect your actual returns. A market with 2% rent growth will outperform one with flat rents, even if they start with the same yield.
Knowing these factors helps, but you still need to know if your target makes sense.
Is a Higher Yield Always Better?
Not necessarily. Here’s what I tell every investor: high yields often come with higher risk or more work.
Why do high-yield properties exist?
- They’re in declining markets with limited appreciation
- They attract more tenant turnover and maintenance issues
- They’re in neighborhoods with higher crime or economic instability
- They require active management
A 12% yield property in a rough neighborhood might generate more headaches than a 6% yield property in a stable suburb.
I’ve seen investors burn out chasing yields without considering the hidden costs.
The appreciation trade-off:
Low-yield properties in strong markets (think California or Seattle) might only yield 3-4%, but they could appreciate 5-8% annually. Your total return combines cash flow and appreciation.
Total Return = Net Rental Yield + Appreciation Rate
A property with 4% yield and 6% appreciation (10% total return) beats a property with 8% yield and 0% appreciation.
You need to decide what matters more: monthly cash flow now or long-term wealth building. With that context in mind, here’s how to set your personal benchmark.
How to Determine Your Target Yield?
Your ideal rental yield depends on your goals:
| Investor Type | Target Net Yield | Best Markets | Primary Focus |
|---|---|---|---|
| Cash Flow Investors | 7-10% | Midwest, Southern markets (Cleveland, Detroit, Memphis) | Monthly income now |
| Appreciation Investors | 3-5% | High-growth coastal markets (San Francisco, Seattle, San Jose) | Long-term wealth building |
| Balanced Investors | 5-7% | Stable, growing secondary markets (Charlotte, Phoenix, Tampa) | Income + moderate appreciation |
For immediate monthly income, target higher yields in affordable markets. For long-term wealth, accept lower yields in high-growth areas with faster property value increases.
For a balanced approach, my personal preference is to aim for 5-7% net yields in stable, growing markets.
1. The 1% Rule Quick Check
Here’s a simple screening tool before you run full calculations: the monthly rent should equal at least 1% of the purchase price.
Example: A $200,000 property should rent for at least $2,000/month.
This rule typically corresponds to an 8-10% gross yield and helps you quickly eliminate properties that won’t generate enough income.
It’s not perfect, but it’s a fast first filter. Now let’s talk about how to actually hit your targets.
2. Tips to Improve Your Rental Yield
Once you understand what yield to target, here are practical ways to boost your returns:
1. Buy Below Market Value
The best time to create a strong yield is at the time of purchase. Negotiate hard, look for distressed properties, or buy during market downturns.
Every $10,000 you save on purchase price improves your yield by 0.5% on a $200,000 property.
2. Increase Rents Strategically
Make property improvements that justify higher rents, such as updated kitchens, modern bathrooms, energy-efficient appliances, or added amenities like washer/dryer hookups.
Even a $50/month rent increase adds $600 annually, boosting yield by 0.3% on a $200,000 property.
3. Reduce Operating Expenses
Shop annually for better insurance rates. Appeal property tax assessments if values drop. Build a maintenance reserve to handle repairs yourself, avoiding contractor calls for small issues.
Self-managing your property can save you 8-10% on rent if you have the time and skills.
4. Choose the Right Property Type
Single-family homes in B-class neighborhoods often offer the best yield-to-effort ratio. They attract stable tenants and require less intensive management than C-class properties.
Multi-family properties can deliver better yields due to economies of scale. Let’s wrap this up with what you should actually do next.
Conclusion
A good rental yield depends on your market and goals, but 6% net return is my baseline for most investors.
Don’t chase high yields without knowing the trade-offs. Calculate both gross and net yields, factor in appreciation potential, and match your targets to your strategy.
Start by running the numbers on properties in your target market. Use the 1% rule to screen quickly, then calculate net yield on anything that passes. Remember that yield is just one piece of the puzzle.
The best investment combines solid cash flow with long-term appreciation in a market you understand. Run the numbers honestly, stay patient, and you’ll build real wealth through rental properties.
