Gross Yield
Gross yield is annual gross revenue divided by property value, expressed as a percentage — a quick pre-expense measure of income relative to investment value.
Gross Yield = Annual Gross Revenue ÷ Property Value × 100. Unlike cap rate, which uses NOI (net of expenses), gross yield uses total revenue before expenses. This makes it a faster but less precise metric for comparing properties.
STR properties typically have gross yields of 8–18%, significantly higher than long-term rentals (4–8%) because of premium nightly pricing. However, STR also has higher operating expenses, so gross yield overstates actual returns compared to cap rate.
A useful rule of thumb: STR operating expense ratios of 35–50% mean actual cap rate is roughly 50–65% of gross yield. A 15% gross yield property might have an 8–10% cap rate after expenses — still excellent, but the expense haircut is significant.
Gross yield is most useful as a quick screening metric. If a property's gross yield is too low to generate acceptable cap rates even with perfect cost management, it's likely not worth deeper analysis. If gross yield is strong, proceed to full expense modeling.
Formula
Gross Yield = Annual Gross Revenue ÷ Property Value × 100Calculate It
Quick Calculator
Gross Yield = Annual Gross Revenue ÷ Property Value × 100
Gross Yield
13.00%
Worked Example
A property generates $65,000 in gross annual revenue and is valued at $500,000. Gross Yield = $65,000 ÷ $500,000 × 100 = 13%. At a 40% expense ratio, cap rate ≈ 7.8%.
Related Terms
Related Calculators
Frequently Asked Questions
What is a good gross yield for a short-term rental?+
A gross yield above 12% is generally considered strong for STR properties. Below 8% may struggle to generate adequate NOI after expenses. The key is to model the expense ratio for your specific market — high-service markets with professional management have expense ratios of 45–55%, leaving less NOI from a given gross yield.
What is the difference between gross yield and cap rate?+
Gross yield uses revenue before expenses; cap rate uses NOI (revenue minus operating expenses). Cap rate is always lower than gross yield by the operating expense ratio. For a 40% expense ratio: $65,000 gross revenue → $39,000 NOI → 7.8% cap rate on a $500,000 property vs 13% gross yield.
How do I use gross yield to screen deals quickly?+
Calculate gross yield first: if it's below 8–9%, the deal likely can't support strong cap rates after typical STR expenses. If it's above 12–15%, proceed to model full expenses. This two-step filter lets you quickly eliminate weak deals before spending time on detailed analysis.
Can gross yield be misleading?+
Yes — gross yield ignores expenses entirely. A property with a 15% gross yield in a high-regulation market (with permit fees, compliance costs, and professional management) might have the same cap rate as a property with 12% gross yield in a low-cost market. Always move beyond gross yield to NOI-based analysis.
What is the gross-yield-to-cap-rate conversion?+
Cap Rate ≈ Gross Yield × (1 − Expense Ratio). For a 40% expense ratio: Cap Rate = Gross Yield × 0.60. For 45%: Cap Rate = Gross Yield × 0.55. Use this as a quick estimate; always model actual expenses for final underwriting.