Short-term rental
Gross rental yield
Also written: rental yield
What Gross rental yield means
Gross rental yield is the annual top-line rental revenue generated by a property expressed as a percentage of its total purchase price or market value. It measures raw income generation before accounting for operating expenses, taxes, financing costs, or maintenance fees.
Formula
Gross Rental Yield = (Annual Gross Rental Income / Total Property Purchase Price) × 100
How it is used
Investors and asset managers use gross rental yield for quick, preliminary screening across potential property acquisitions and geographic markets. It establishes a baseline revenue benchmark to compare short-term rentals against long-term residential leases. However, because short-term rentals incur high operational overhead—such as cleaning, utilities, channel commission fees, and guest amenities—operators never rely on gross yield alone to make capital allocation decisions. Instead, it serves as the top-of-funnel filter before calculating net yield and cash-on-cash return.
Worked example
An investor purchases a beachfront short-term rental property for $600,000, including acquisition costs. Over a 12-month period, the unit achieves an average daily rate of $250 at 70% occupancy, generating $63,875 in gross rental revenue. The gross rental yield is ($63,875 / $600,000) × 100 = 10.65%.
Common mistake
Confusing gross rental yield with net yield leads to overestimating profitability, as short-term rental operating costs often consume 30% to 50% of gross revenue.
Related terms
Work it out
Cash-on-Cash Return Calculator — What a short-term rental returns on the cash you actually put in.