Rental yield is the most common metric used by real estate investors to evaluate the income-generating potential of a property. It expresses your rental income as a percentage of the property's value, making it easy to compare different investment opportunities regardless of their price points.

Gross rental yield is calculated by dividing the annual rental income by the property value and multiplying by 100. It gives you a quick snapshot but does not account for operating costs. Net rental yield subtracts annual expenses like maintenance, taxes, insurance, and management fees from the rental income before dividing by the property value, giving you a more accurate picture of your actual return.

A common benchmark for a good net rental yield is 5% to 8%, though this varies significantly by market. Properties in high-demand urban areas may yield 3% to 5% but offer stronger appreciation potential, while properties in smaller markets may yield 8% or more but carry higher vacancy risk. Always evaluate yield alongside appreciation potential, vacancy rates, and your own investment goals.