# Rental yield calculator: gross vs net yield, payback years and whether a rental flat is worth it

> Rent looks like free money until you subtract tax, repairs and empty months. This guide shows how to work out gross and net rental yield, what payback years really mean, how yield compares with a loan rate, and why rent is only half of a property's return.

Published 2026-10-09 by Toolcloak. 3 minute read. Original: https://toolcloak.pages.dev/articles/rental-yield-calculator-gross-vs-net-yield-payback-years-and-whether-a-rental-flat-is-worth-it
Related free tool: [Rental Yield Calculator](https://toolcloak.pages.dev/tools/rental-yield-calculator)

**Rental yield** is the yearly rent as a percentage of what the property costs. It is the quickest way to compare a flat that earns rent with a fixed deposit, a fund or another flat. There are two versions: **gross** yield uses the full rent, and **net** yield first subtracts the costs of owning the property.

> **In short**
> - **Gross yield = yearly rent ÷ price × 100.** ₹20,000 a month on a ₹60 lakh flat is ₹2,40,000 a year, or **4.00%**.
> - **Net yield = (yearly rent − yearly costs) ÷ price × 100.** With ₹30,000 of costs it is **3.50%**.
> - **Payback years = price ÷ net yearly income** = **28.6 years** of rent to earn back the price.
> - Yield is only the rent part of the return. Price changes, loan interest and your own time matter too.

## The formulas, step by step

**Example: a ₹60 lakh flat rented at ₹20,000 a month**

1. **Work out the yearly rent.** ₹20,000 × 12 = **₹2,40,000**.
2. **Gross yield.** ₹2,40,000 ÷ ₹60,00,000 × 100 = **4.00%**.
3. **Subtract the yearly costs.** ₹2,40,000 − ₹30,000 = **₹2,10,000** net income.
4. **Net yield and payback.** ₹2,10,000 ÷ ₹60,00,000 = **3.50%**, and ₹60,00,000 ÷ ₹2,10,000 = **28.6 years**.

*The tool returns four numbers: net yield, gross yield, net yearly income and payback years.*

Try it: [Rental Yield Calculator](https://toolcloak.pages.dev/tools/rental-yield-calculator). Enter the price, the monthly rent and the yearly costs to see the gross and net yield.

## What counts as a cost

- **Property tax and society charges,** paid by the owner and not by the tenant.
- **Repairs and painting** between tenants. Setting aside a small share of the rent each month smooths the bumps.
- **Vacancy,** the months between tenants when you earn nothing.
- **Agent or brokerage fees** for finding a new tenant.
- **Income tax on the rent,** if you want a true after-tax yield.

> **One empty month is bigger than it looks:** A month without a tenant costs ₹20,000, which is 8.3% of the year's rent. Two empty months wipe out about 17% of it. Many first-time owners forget to count vacancy at all.

## How rent changes the yield

| Monthly rent | Yearly rent | Net income | Gross yield | Net yield |
| --- | --- | --- | --- | --- |
| ₹15,000 | ₹1,80,000 | ₹1,50,000 | 3.00% | 2.50% |
| ₹20,000 | ₹2,40,000 | ₹2,10,000 | 4.00% | 3.50% |
| ₹25,000 | ₹3,00,000 | ₹2,70,000 | 5.00% | 4.50% |
| ₹30,000 | ₹3,60,000 | ₹3,30,000 | 6.00% | 5.50% |
| ₹35,000 | ₹4,20,000 | ₹3,90,000 | 7.00% | 6.50% |

*All rows use a ₹60 lakh price and ₹30,000 of yearly costs. Each ₹5,000 of extra monthly rent adds 1 percentage point to the net yield.*

**Net yield for different monthly rents (%)**

|  | Value |
| --- | --- |
| ₹15k | 2.5% |
| ₹20k | 3.5% |
| ₹25k | 4.5% |
| ₹30k | 5.5% |
| ₹35k | 6.5% |

*A rent increase flows straight into net yield because the costs stay the same. A flat at ₹35,000 a month would give a net yield of 6.5% here.*

## Payback years in plain words

Payback years tells you how long the rent alone would take to repay the price: ₹60,00,000 ÷ ₹2,10,000 is about 28.6 years. It ignores price changes, so it is not a forecast. It does help you see when a high price compared with the rent makes a flat a long-term bet rather than an income source.

**The example flat in four numbers**

|  | Value | Note |
| --- | --- | --- |
| Gross yield | 4.00% | Before costs |
| Net yield | 3.50% | After yearly costs |
| Net income a year | ₹2,10,000 | ₹2,40,000 − ₹30,000 |
| Payback | 28.6 years | Price ÷ net income |

*A yield around 3% to 4% is common for residential flats in many Indian cities, but it varies a lot by city, locality and building type.*

## Yield against your loan rate

If you borrow to buy, compare the net yield with the loan rate. Suppose you finance 80% of the flat, which is ₹48,00,000, at 8.75% a year. The interest alone is about ₹4,20,000 a year, while the net rent is ₹2,10,000.

**Rent against loan interest in year one**

| Net rent | Interest on the loan |
| --- | --- |
| ₹2,10,000 a year | ₹4,20,000 a year |
| Gross rent ₹2,40,000 | 80% of ₹60 lakh = ₹48,00,000 |
| Less costs ₹30,000 | 8.75% a year, interest part only |
| Before income tax | Principal repaid is extra |

*The rent covers about half of the interest. You top up the rest from your salary and hope the price rises. This is called negative carry.*

> **Compare with a fixed deposit:** If a fixed deposit pays 7% a year, a flat yielding 3.5% needs about 3.5% a year of price growth just to match it. Use the [FD Calculator](https://toolcloak.pages.dev/tools/fd-calculator) to see what a deposit earns.

## Rent is only half the return

The **total return** on a property is the yield plus the change in price. If a flat yields 3.5% net and its price rises 5% a year, the combined return is roughly 8.5% before tax and loan costs. If the price falls, it can drag the total below zero even when the rent keeps coming. Always look at both parts.

## Checklist before you buy to rent

1. **Ask local brokers for real rents** on similar flats, not just the asking price.
2. **List every yearly cost,** including tax, repairs and at least one empty month.
3. **Calculate gross and net yield** with the calculator.
4. **Compare the net yield** with your loan rate and with a deposit.
5. **Test a worse case:** run the numbers with 10% lower rent and two empty months.

## Frequently asked questions

### How do I calculate rental yield?

Divide the yearly rent by the property price and multiply by 100. For rent of 20,000 a month on a 60 lakh flat, the yearly rent is 2,40,000, so the gross yield is 4%.

### What is the difference between gross and net rental yield?

Gross yield uses the full rent. Net yield subtracts yearly costs such as tax, repairs and vacancy first. Net yield is the more realistic figure.

### What is a good rental yield?

It depends on the city and the type of property. Many residential flats in Indian cities yield about 2% to 4% gross, while commercial property can yield more. Compare it with the loan rate and with deposit rates.

### What does payback years mean?

It is the price divided by the net yearly rental income, and shows how many years of rent would be needed to earn back the purchase price. It ignores price changes and tax.

### Does rental yield include price appreciation?

No. Yield is only the income from rent. The total return is the yield plus the change in the property's value, minus costs such as loan interest.

### Can I use the calculator for a commercial property?

Yes. Enter the price, the monthly rent and your yearly costs. The [Rental Yield Calculator](https://toolcloak.pages.dev/tools/rental-yield-calculator) works for any property that earns rent.