Net vs. Gross Yield: Don't Get Caught Out

Gross yield is the number in every listing and every pitch. It is annual rent divided by purchase price, and it is almost always the figure quoted when someone tells you a unit "yields 8 percent." The problem is that gross yield is not the money you keep.

Net yield strips out the costs that gross conveniently ignores: service charges, periods of vacancy between tenants, management and maintenance, and the transaction costs of letting. In some buildings these are minor; in others, particularly amenity-heavy towers, they take a meaningful bite.

The gap matters most where it is invisible. Two units advertised at the same gross yield can deliver very different net returns once a heavy service charge or a high-vacancy micro-market is factored in. Service charges alone can swing net yield by more than a percentage point.

The discipline is to underwrite every purchase on a net basis. Pull the actual service charge, assume a realistic vacancy allowance, and deduct management, then compare. The number that survives that exercise is the one that actually reaches your account, and it is the only one worth comparing across deals.