Everyday Money guide
Gross Yield vs Net Yield vs Cash-on-Cash Return
Compare property return measures and choose the one that answers the investment question.
Updated 16 October 2026 • Reviewed by Tools by Layna Editorial Team • General information only
Why this decision is easy to misread
Gross yield, net yield and cash-on-cash return use different numerators and denominators. They can all be correct while pointing in different directions.
Gross and net yield describe the property’s income performance relative to price. Cash-on-cash return adds finance and compares annual cash flow with the investor’s actual upfront cash.
The calculation, step by step
Gross yield
Annual market rent divided by purchase price, before vacancy and expenses.
In the calculator, this item should be entered separately so a change in gross yield can be tested without hiding it inside another assumption.
Net yield
Effective rental income minus operating expenses, divided by purchase price.
In the calculator, this item should be entered separately so a change in net yield can be tested without hiding it inside another assumption.
Cash-on-cash return
Annual cash flow after loan repayments divided by deposit and buying cash.
In the calculator, this item should be entered separately so a change in cash-on-cash return can be tested without hiding it inside another assumption.
Total ROI
Cumulative cash flow plus net sale proceeds minus initial cash, divided by initial cash.
In the calculator, this item should be entered separately so a change in total roi can be tested without hiding it inside another assumption.
Annualised return
Accounts for timing of cash flows and holding period.
In the calculator, this item should be entered separately so a change in annualised return can be tested without hiding it inside another assumption.
Comparability
Use the same assumptions across properties.
In the calculator, this item should be entered separately so a change in comparability can be tested without hiding it inside another assumption.
Worked Australian example
A $650,000 property renting for $650 a week has a gross yield of 5.2%. After vacancy and $12,000 of operating expenses, net yield may fall near 3.1%. With a highly leveraged loan and principal-and-interest repayments, cash-on-cash return can be negative.
Capital growth could still create a positive total ROI, but that is a different assumption from rental performance.
Decision checklist
| Step | What to confirm |
|---|---|
| 1 | Use gross yield only for quick screening. |
| 2 | Use net yield to compare property operations. |
| 3 | Use cash-on-cash to test affordability under financing. |
| 4 | Use total ROI for the full buy-hold-sell scenario. |
| 5 | Keep capital-growth assumptions separate. |
Use the calculator with this guide
Common mistakes
- Calling gross yield profit.
- Comparing leveraged and unleveraged returns without labels.
- Using purchase price for one property and total cost for another.
- Ignoring negative cash flow.
- Treating assumed growth as guaranteed.
Questions to answer before acting
- Use gross yield only for quick screening.
- Use net yield to compare property operations.
- Use cash-on-cash to test affordability under financing.
- Use total ROI for the full buy-hold-sell scenario.
- Keep capital-growth assumptions separate.
Record keeping and review
For this calculation, retain the evidence behind gross yield and net yield.
Official sources
Related guides
Frequently asked questions
Which yield is most important?
Net yield is stronger for property comparison; cash-on-cash is stronger for the investor’s financed cash flow.
Can cash-on-cash be negative?
Yes, when loan repayments and costs exceed rent.
Does principal count as a return?
Principal reduction increases equity but is not spendable annual cash flow.
Should buying costs be in yield?
Common yield conventions use purchase price; total-cost returns can be calculated separately.
Can two properties have the same gross yield but different ROI?
Yes, because expenses, finance, vacancy and growth differ.
Bottom line
Choose the metric after choosing the question; no single property percentage answers everything.