What is Rental Yield?
Rental yield measures the annual return generated by an investment property, expressed as a percentage of the purchase price. It's the fundamental metric for evaluating whether a real estate investment is attractive.
Types of Yield
Gross Yield
Gross Yield = (Annual Rent ÷ Purchase Price) × 100
The simplest metric. Does not account for expenses or vacancy.
Net Yield
Net Yield = ((Effective Rent - Annual Expenses) ÷ Purchase Price) × 100
Deducts operating expenses and vacancy periods. The most realistic metric.
What Expenses to Consider?
- Maintenance: 1-2% of property value per year
- Insurance: Varies by location and property type
- Property taxes: IUSI in Guatemala (~0.2-0.9% of fiscal value)
- Management: 8-10% of rent if using a property manager
- Vacancy: Typically 5-10% of annual income
In Guatemala, areas like Zone 10, Zone 14, Cayalá, and Antigua Guatemala offer the best rental yield opportunities, especially for short-term Airbnb rentals.
Cap Rate
The Cap Rate (capitalization rate) is a professional metric that allows comparing properties regardless of financing. A Cap Rate of 5-8% is considered good for residential properties.
As a rule of thumb, aim for at least 5% net yield. If lower, you might get better returns from other financial instruments with less risk.