Home » Real Estate Investing » Gross Rental Yield Calculator (For Quick Checking of Rental Potential)

Gross Rental Yield Calculator (For Quick Checking of Rental Potential)

This is our very own gross rental yield calculator, which will help you compare the rent and the selling price of a target rental property. This is a quick way to see if a property has possibly good returns/earning potential, as compared to the selling price (or if it’s too expensive and has low returns). Check it out below.

Gross rental yield calculator

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How to use

To calculate for the gross rental yield, just enter the values in the fields for data input:

  • Monthly Rent – This is the monthly rent for your target property in Philippine Peso (PHP)
  • Selling Price – This is the selling price of the property you want to buy in Philippine Peso (PHP)

Explanation of calculated results

After entering the values, the following are automatically calculated and displayed:

  • Monthly Gross Rental Yield – This is the calculated monthly gross rental yield, which compares the monthly rent to the selling price, as a percentage. Can also be referred to as the monthly gross return on investment of a rental property.
  • Annual Gross Rental Yield – This is the calculated annual gross rental yield, which compares the annual rent to the selling price, as a percentage. The annual rent is simply the monthly rent multiplied by 12 months/year. The annual yield is also equal to the monthly yield multiplied by 12. Can also be referred to as the annual gross return on investment of a target rental property.

What returns to aim for

I was asked about this several times when I asked for feedback about this calculator, and my opinions are as follows:

  • It depends on the average returns in your target location. For me, anything significantly above average is worth looking into. “Significant” depends on you. In my case, anything approaching 1% per month or 12% per year is significant.
  • In the US, they use the 1% or 2% rule (refers to monthly gross return). I believe the 1% rule is more applicable here in the Philippines, which is based on my observations, so far (during the past 6 years or so in our target locations). However, as Brandon Turner of BiggerPockets.com would always say, these are not really rules. It’s just a “rule of thumb”, and I agree.

So just because a target property has high rental returns, it does not follow that it is already a good deal that you should buy. As usual, you should do a reasonable amount of due diligence, and continue with your analysis. Refer to the disclaimer and the recommended article below.

Disclaimer

The results you will get above are only for quick analysis. This aims to help you avoid wasting time with those properties that are obviously too expensive to buy to give good returns as a rental. Of course, you will also see those that have good gross returns that deserve more thorough analysis.

Again, this calculator only computes for the GROSS rental yield/return on investment where vacancy rates, property management, taxes, maintenance, loan payments (if any) and other applicable expenses, are NOT YET considered. To take this further, you should check/estimate the NET returns.

Recommended reading

To estimate the possible NET returns of a rental property, please refer to the following article:

As always, our standard site disclaimer applies.

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Did you find this calculator helpful? Any suggestions? Let me know by leaving a comment below. Thanks!

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About Jay Castillo
People encounter problems and make mistakes when buying foreclosed properties, and Jay wants to help people avoid those problems/ mistakes. Jay encountered a lot of those, which is why he started this blog in 2008 to serve as a guide where he shares lessons learned, and how to overcome challenges you may encounter when investing foreclosed properties in the Philippines … [Read more]
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4 thoughts on “Gross Rental Yield Calculator (For Quick Checking of Rental Potential)”

  1. Hi good evening.

    I’m facing a dilemma right now. I’m an OFW in Dubai and I have been offered to invest in a condo by SMDC. I’ve already paid the reservation fee for a condo in Spring Residences in Bicutan and I’m about to start my monthly DP in 2 weeks. Now, I am really getting confused and scared. I’m thinking now if I should go ahead with it or just drop it before I could start with the monthly DP.

    You see, the list price for the 1BR which I have reserved is P3.8M. However, the total price came to more than P4.6M after adding VAT and other charges. The payment term allows me to pay 10% of the price for 23 months and the rest 90% on the handover. So my monthly DP is 15,000 for 23 months. The remaining balance which is around P4.2M will have to be paid on the handover (on 24th month which is August 2020). I’m planning to take a bank loan to pay off the balance. Now, I’m having second thoughts on whether to continue or not as I’m now thinking that the price is too high for a 1BR with a size of 28.1sqm. I’m also concerned on the rental potential of the unit as it’s located near SM Bicutan in Bicutan, Paranaque. I’m also worried if I’ll be able to get a loan by the time the unit becomes available for handover. I actually wanted to buy the unit so I can have a passive income then perhaps sell it after 3 or 5 years when I’ve maximized my investment. I also like the layout as it an be converted to a 2BR. But I’m really really confused right now.

    I do hope that you can help me and give me some advice?

    Thanks heaps.

    Reply
    • Hi Michelle,

      Unless you are 100% sure that your bank loan for Php4.2M will be approved, I would suggest you weigh your options very carefully in the next 2 weeks, so you can decide if you will just cut your losses and forfeit your reservation fee.

      Would you know the rental rate for other existing condos near SM Bicutan?

      Yes, I would have to agree that Php4.6M is too expensive for a 28.1sqm condo.

      I would understand the price if it’s in the SM MOA area where a 24sqm condo can now get a rental rate of Php35K/mo. But for Bicutan, I’m not so sure.

      Reply
      • Hi Jay thank you for your reply.

        I think the rental rate for 1BR condos near SM Bicutan is between 25-30,000 per month and 2,000-2,500 per night for short term rentals. The agent said I’ll get around 60,000 if I’ll give it for daily rentals. Is it good?
        Thank you so much.

        Kind Regards,

        Michelle

        Reply
        • Sorry Michelle, I missed this reply of yours.

          While it is possible to get Php60K/mo for daily rentals, it night be too optimistic. I would suggest to get the average occupancy before you decide.

          Reply

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