Rental yield: 500,000 · 3,500/mo = 8.40% gross / 5.58% net
Rental yield measures the annual return generated by an investment property, expressed as a percentage of the purchase price. This calculator separates gross yield from net yield (after expenses and vacancy) and also shows Cap Rate, monthly net income, and payback years.
With a 500,000 property, 3,500/month rent, 12,000 annual expenses, and 5% vacancy:
- Gross annual income: 42,000 → gross yield 8.40%
- Net annual income: 27,900 → net yield 5.58% (Cap Rate 5.58%)
- Monthly net income: 2,325; payback in ≈ 17.9 years
Formulas
Gross Yield = (Annual Rent ÷ Purchase Price) × 100
Net Yield = ((Effective Rent − Annual Expenses) ÷ Purchase Price) × 100
Cap Rate = (Effective Rent − Annual Expenses) ÷ Purchase Price × 100
"Effective rent" accounts for vacancy: with 5% of months vacant, you only collect 95% of the year.
Step-by-step example (calculator defaults)
- Gross annual income = 3,500 × 12 = 42,000.
- 5% vacancy → effective income = 42,000 × 0.95 = 39,900.
- Annual expenses (maintenance, insurance, taxes, management) = 12,000.
- Net income = 39,900 − 12,000 = 27,900.
- Gross yield = 42,000 / 500,000 = 8.40%; net yield = 27,900 / 500,000 = 5.58% (same as Cap Rate).
- Payback = 500,000 / 27,900 ≈ 17.9 years.
Scenario table (same engine logic)
| Price | Rent/month | Expenses/yr | Vacancy | Gross | Net | Payback |
|---|---|---|---|---|---|---|
| 500,000 | 3,500 | 12,000 | 5% | 8.40% | 5.58% | 17.9 years |
| 500,000 | 3,500 | 12,000 | 0% | 8.40% | 6.00% | 16.7 years |
| 350,000 | 2,500 | 8,000 | 5% | 8.57% | 5.86% | 17.1 years |
| 750,000 | 6,000 | 20,000 | 10% | 9.60% | 5.97% | 16.7 years |
| 900,000 | 4,500 | 15,000 | 5% | 6.00% | 4.03% | 24.8 years |
Rent sensitivity (fixed 500,000 price)
Same property, 12,000/year expenses and 5% vacancy; only monthly rent changes:
| Rent/month | Gross annual | Gross yield | Net annual | Net yield | Payback |
|---|---|---|---|---|---|
| 2,500 | 30,000 | 6.00% | 16,500 | 3.30% | 30.3 years |
| 3,000 | 36,000 | 7.20% | 22,200 | 4.44% | 22.5 years |
| 3,500 | 42,000 | 8.40% | 27,900 | 5.58% | 17.9 years |
| 4,500 | 54,000 | 10.80% | 39,300 | 7.86% | 12.7 years |
| 5,000 | 60,000 | 12.00% | 45,000 | 9.00% | 11.1 years |
Indicative yield bands (residential)
| Metric | Weak | Acceptable | Attractive | Default example |
|---|---|---|---|---|
| Gross | < 6% | 6–8% | > 8% | 8.40% |
| Net / Cap Rate | < 4% | 4–6% | > 6% | 5.58% |
| Payback | > 25 years | 15–25 years | < 15 years | ~17.9 years |
These bands are educational: location, liquidity, expected appreciation, and your opportunity cost matter more than a single percentage.
What expenses to consider?
- Maintenance: 1-2% of property value per year
- Insurance: varies by location and property type
- Property taxes: IUSI in Guatemala (indicative range of ~0.2-0.9% of fiscal value; check your municipality)
- Management: 8-10% of rent if using a property manager
- Vacancy: typically 5-10% of annual income
Areas like Zone 10, Zone 14, Cayalá, and Antigua Guatemala tend to concentrate rental demand, especially for short-term stays. Always compare the net yield of each area before deciding. Cross-check cash flow with IUSI and, if you plan to sell, Guatemala capital gains.
Interpreting the result
- Gross vs net: gross is the first filter; net is what pays your bills. A 900,000 property looks fine at 4,500/month, but its net yield of 4.03% may trail other options.
- Cap Rate compares without financing: it is the same net income divided by price, letting you compare properties of different prices regardless of how you finance them.
- Indicative reference: 6-8% gross and 4-6% net are commonly considered attractive ranges for residential, but everything depends on location, risk, and your opportunity cost.
- Common mistakes: skipping vacancy and maintenance, treating gross rent as profit, and forgetting that appreciation does not pay the mortgage while the unit sits empty.
This calculator does not include income tax on rent, improvements, closing costs, or the effect of financing (it evaluates the property as a cash purchase). Tax rates and expense ranges are educational references: verify current values in your country and municipality. Educational tool, not investment advice.
Frequently asked questions
Rental yield is the annual return generated by an investment property through rent collection, expressed as a percentage of the purchase price. With the defaults: 8.40% gross and 5.58% net.
As an indicative reference, 6-8% gross and 4-6% net are commonly considered attractive for residential. Always compare the net figure, after expenses and vacancy, against your opportunity cost.
Gross yield only considers rental income (42,000 → 8.40%). Net yield deducts expenses and vacancy (27,900 → 5.58%). Net is the realistic metric.
Cap Rate (capitalization rate) is the net operating income divided by the property price. With the defaults it equals the net yield: 5.58%. It is the key metric for comparing real estate investments.
Short-term rentals (like Airbnb) can earn more per month but require more management and carry higher vacancy. Long-term is more stable: run the calculator with the real vacancy and expenses of each format.
Related calculators
- Rent vs buy: compare buying to live vs. keep renting
- Guatemala mortgage: the payment if you finance the property
- IUSI Guatemala: property tax that reduces net yield
- Compound interest: compare against other investments
- ROI: total return of the real estate investment
- Guatemala capital gains: if you plan to sell at a gain