What US rentals really yield after costs
Gross yield is a marketing number. Here is the arithmetic that survives HOA dues, vacancy, insurance and tax.
Almost every brokerage quotes gross yield. Almost none quote net. The difference between the two is usually between 1.5 and 2.5 percentage points, which on a $550,000 purchase is the difference between a good investment and a mediocre one.
The arithmetic
Start with annual rent. Subtract HOA dues, which the owner pays. Subtract a vacancy allowance — we model 85% occupancy, which is about seven weeks empty per year. Subtract maintenance at around 5% of rent, property tax, homeowner’s insurance, and management fees if you use a brokerage.
| Line | Example unit — Frisco, TX townhome |
|---|---|
| Purchase price | $549,000 |
| Monthly rent | $2,850 |
| Gross annual rent | $34,200 |
| Gross yield | 6.2% |
| Less HOA dues | – $3,600 |
| Less vacancy at 85% | – $5,130 |
| Less maintenance | – $1,710 |
| Less property tax and insurance | – $8,900 |
| Less management at 8% | – $2,736 |
| Net annual income | $12,124 |
| Net yield | 2.2% |
What that number tells you
A 2.2% net yield on a Texas townhome is not what the 6.2% headline implied, and the reason is almost entirely property tax and insurance. In a state with no income tax, the property tax rate does the work — and it is the line item investors most often leave out of the model. Judge every opportunity on the net figure and compare like with like across states, because the same gross yield produces very different net results in Texas, Florida and Illinois.
The levers that actually move the number
Occupancy first. A unit near a hospital, university or corporate campus leases faster and empties less often, and one avoided vacant month is worth more than a $100 rent increase. Then insurance and HOA — check both before you buy, because a badly run association or a coastal insurance market can quietly consume a full percentage point of yield every year. These figures are illustrative demonstration data.
Want this applied to a specific property?
Send us the listing — ours or anyone else’s — and we will run the numbers and tell you honestly what we think.
