The gross yield is a useful guide when you are comparing investment properties. It is the relationship between the annual gross income and the purchase price of the investment. Using this as a yardstick you can compare apples with apples. Even though some apples might cost a different amount.
It is good to start thinking of costs and income as an annual amount, especially since bank rates are always quoted this way.
How do I calculate it?
Lets say a home is being purchased for $500,000 and it receives $500 per week rent. You would turn $500 per week into an annual figure, by multiplying by 52(weeks in the year). So $26,000 would be your annual rent and if you divide that figure by $500,000(purchase price) you will get 5.2%.
Your gross yield is 5.2%. It is a great way to compare different properties and also a quick way to figure out how much you might have left over after paying your bank interest.
