Rental yield tells you how much income a property produces compared with what you paid for it. It sounds simple, but the version you are shown makes a big difference.
Gross yield
Annual rent divided by the purchase price. It is quick to calculate and is the number most often quoted — but it ignores every cost of owning the property.
Net yield
Annual rent minus the costs of owning and letting the property — maintenance, property tax, vacancy periods, repairs, management fees and insurance — divided by the full cost of buying it, including charges and taxes.
A simple illustration
Purely as an example: a home bought for ₹1 crore in total that rents for ₹30,000 a month earns ₹3.6 lakh a year — a 3.6% gross yield. If ownership costs and a month of vacancy add up to ₹80,000 a year, the net yield falls to 2.8%.
For holiday homes, ask about occupancy
Short-stay and vacation homes depend on how many nights are actually booked and at what rate. Ask what occupancy a model assumes, what happens at lower occupancy, and whether there is real operating history behind the numbers.
Always ask: is this yield gross or net — and what does it assume?
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This article is for education only and is not investment, legal or tax advice.
