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 22 July 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.
Gross Yield vs Net Yield vs Cash-on-Cash Return should distinguish gross yield, net yield, cash-on-cash return and total ROI because each includes a different set of costs and cash flows. No single percentage shows all four perspectives.
Tax treatment relevant to Gross Yield vs Net Yield vs Cash-on-Cash Return depends on ownership, use, borrowing purpose and the nature of each expense. This guide explains cash flow and general concepts; it does not calculate deductions, capital gains tax or future legislative changes.
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. Keeping the input visible also makes later reviews and comparisons more reliable.
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. Keeping the input visible also makes later reviews and comparisons more reliable.
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. Keeping the input visible also makes later reviews and comparisons more reliable.
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. Keeping the input visible also makes later reviews and comparisons more reliable.
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. Keeping the input visible also makes later reviews and comparisons more reliable.
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. Keeping the input visible also makes later reviews and comparisons more reliable.
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
Open Investment Property ROI Calculator Australia
For Gross Yield vs Net Yield vs Cash-on-Cash Return, separate purchase cash, annual operating cash flow, loan principal, capital growth and sale proceeds. One strong component should not be allowed to hide a weak one.
Use the linked calculator for gross yield vs net yield vs cash-on-cash return with a documented base case. Save the output, then create a conservative case using the most uncertain input from the worked example.
For Gross Yield vs Net Yield vs Cash-on-Cash Return, record the rent, occupancy, interest rate or sale value required to meet the selected cash-flow or return target. That break-even threshold shows the margin for error more clearly than the headline projection alone.
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.
Where gross yield vs net yield vs cash-on-cash return depends on law, tax, eligibility, lending policy or a contract, verify the applicable rule with the official source. The calculator measures the consequence of the input; it does not establish that the input legally applies.
Record keeping and review
For this calculation, retain the evidence behind gross yield and net yield. Label each number as confirmed, quoted, estimated or stress-tested, and date the evidence so a later comparison does not silently mix figures from different periods.
Official sources
The sources below were selected for Gross Yield vs Net Yield vs Cash-on-Cash Return because they define the relevant measurement, rule or evidence base. Recheck dated rates, thresholds and official guidance before acting.
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.
Sensitivity check before acting
When using Gross Yield vs Net Yield vs Cash-on-Cash Return, stress-test vacancy, maintenance, interest and capital growth separately. Keep zero-growth and higher-rate cases beside the base result so an optimistic sale price cannot conceal weak cash flow.
For Gross Yield vs Net Yield vs Cash-on-Cash Return, keep the base, conservative and stress cases together. The decision is stronger when it survives a realistic adverse change rather than depending on one precise forecast.
Bottom line
Choose the metric after choosing the question; no single property percentage answers everything.