Gross Yield and Net Yield Are Not the Same Conversation
Gross yield is annual rent divided by purchase price. Net yield subtracts service charges, maintenance, vacancy and management, and typically lands about one to one and a half points below gross. Gross is a screening tool for lining up options quickly. Net is the number the decision should rest on.
What each one includes
Gross yield is deliberately simple: annual rent over purchase price. That simplicity is why every listing quotes it and why it is useful for a first pass across a lot of options.
Net yield takes the same rent and subtracts what it costs to earn it. Service charges, maintenance and repairs, an allowance for the weeks the unit sits empty between tenants, and management if you are not doing it yourself. What is left is what actually reaches you.
Where the gap comes from
Service charges are usually the largest single deduction and they vary sharply between buildings, which is why two properties showing the same gross yield can separate clearly on net.
Vacancy is the item most often left out. A unit that is empty for a month between tenancies has lost roughly eight per cent of its annual rent, and pretending that never happens makes every projection optimistic in the same direction.
Using them in the right order
Screen on gross, decide on net. Gross gets a long list down to a short one quickly. Net tells you which of the short list is actually better, and it is the one that changes answers.
When you run net, use realistic achieved rent rather than the asking rent in the listing, and get the service charge schedule for that specific building rather than a community average.
The honest caveat
Any yield figure is an estimate about the future, and a range is more truthful than a single number. Rents move, service charges are reissued, and vacancy varies with the market.
Treat a quoted yield as an indication that needs checking against the actual numbers for the actual unit, and be suspicious of anyone quoting one to a decimal place as though it were settled.
Want this applied to a specific property? An advisor can run the numbers with you.
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