Two yields, one property
Every income-producing property has two yields. Gross yield is the total annual rent divided by the property value — the headline figure. Net yield is the rent left after all operating expenses are deducted, divided by the property value — the figure that reflects what is actually distributable to investors.
The gap between the two can be large. A property marketed at a 7% gross yield may deliver a 4.5% net yield once management fees, insurance, maintenance, voids, and reserves are accounted for. An investor who compares properties using gross yield alone will systematically overstate the income they receive and may choose a property that is, in net terms, inferior.
What sits between gross and net
The deductions that bridge gross to net include: property management fees (typically 8–15% of rent), insurance, routine maintenance and repairs, a sinking fund for major works, void periods when the property is unoccupied, letting fees when a new tenant is found, and any service charges or ground rent on leasehold properties.
Some costs are fixed and predictable; others are variable. A roof repair or a new boiler is not a regular expense but it is inevitable over a hold period. Good underwriting includes a maintenance reserve so that these lumpy costs do not eat into distributions when they arise.
Platform fees are separate
Property-level expenses are not the same as platform fees. The net yield quoted on a property page usually reflects property-level costs only — the cost of running the building. The platform's asset-management or administration fee is often charged on top, as a percentage of distributions or assets under management. To understand your true take-home return, you need to know both the property net yield and the platform fee structure.
A 5% net yield with a 1% platform fee leaves you with roughly 4% in distributions. A 6% net yield with a 2% fee leaves you with the same. Always read the fee disclosure, not just the yield headline.
A practical comparison
Imagine two properties. Property A: $1M value, $70,000 gross rent, $20,000 expenses — 7% gross, 5% net. Property B: $1M value, $60,000 gross rent, $10,000 expenses — 6% gross, 5% net. On gross yield, A looks better. On net yield, they are identical. And if Property B is in a market with stronger appreciation prospects, it may be the better total-return choice despite the lower headline rent.
The lesson: never compare fractional properties on gross yield. Always use net yield, and always subtract the platform fee to estimate your real income.
Key takeaways
- Gross yield = total rent ÷ value; net yield = rent after expenses ÷ value.
- The gap between gross and net can be 2–3 percentage points once all operating costs are included.
- Platform fees are charged on top of property expenses — subtract them to estimate your true income.
- Always compare properties on net yield, never on the gross headline figure.