What Is Rental Yield? How to Calculate It (With Pakistani Examples)
Rental yield is the yearly rent a property earns, shown as a percentage of its value. It is the quickest way to compare properties, and the easiest number to misuse.
The formula
Gross yield = (monthly rent x 12) / property value x 100
Worked example
A shop is valued at PKR 1.03 crore (PKR 10,300,000) and is let at PKR 66,000 a month.
- Annual rent = 66,000 x 12 = PKR 792,000
- Gross yield = 792,000 / 10,300,000 = 7.68%
A larger shop valued at PKR 1.75 crore and let at PKR 120,000 a month: 1,440,000 / 17,500,000 = 8.23%.
Gross versus net
Gross yield ignores costs. Net yield starts from rent and removes what you actually pay:
- Property expenses (maintenance, utilities, property tax)
- Management or platform fees
- Vacant months
- Withholding tax on the income
If the 7.68% shop loses PKR 60,000 a year to expenses and fees, net rent is PKR 732,000 and net yield is 7.11%. Tax comes on top, depending on law and your status.
What yield does not tell you
- Whether the rent is real. Is the property let today, on a signed lease, or only expected to be?
- How long the lease runs. A 5-year lease is steadier than month to month.
- The tenant. A well-known brand is not the same risk as a one-off tenant.
- Whether the value is right. A high yield on an overpriced property is not a bargain; a high yield can also signal a weaker location.
- Growth. Yield is income only. Value may rise or fall as well.
Yield on your units
If you hold 2% of the units of that shop, you receive 2% of the rent after expenses, fees and tax, so the yield on your investment follows the property's yield, less the costs on your side.
Three habits when comparing
- Compare gross with gross, net with net.
- Check how recent and how contracted the rent is.
- Look at the whole picture of cost, tenant, lease and location.
See live examples on the properties page; each rented property shows its monthly rent and lease start. Yields are targets, not promises.
Frequently asked questions
How do I calculate rental yield?
Multiply the monthly rent by 12, divide by the property value, and multiply by 100. A shop worth PKR 1.03 crore let at PKR 66,000 a month yields 7.68% gross.
What is the difference between gross and net yield?
Gross yield ignores costs. Net yield removes expenses, fees, vacant months and tax, so it is lower.
Does yield include price growth?
No. Yield measures rental income only. The property value may rise or fall separately.
