Gross Yield
Annual rental income from a property divided by its market value (or purchase price), expressed as a percentage. A quick, unlevered snapshot of how hard income is working against the price of the asset — before operating expenses and financing.
Definition
What is Gross Yield?
Gross yield measures how much gross rental income a short-term rental produces relative to the property's value. Chalet expresses it as annual STR income divided by market value (typically median home value or purchase price), shown as a percentage. It answers a simple screening question: for every dollar tied up in this asset class in this market, how many cents of top-line rent does the typical listing generate in a year?
Gross yield is intentionally gross — it does not subtract property management, utilities, taxes, insurance, maintenance, or mortgage payments. That is what distinguishes it from cap rate, which uses Net Operating Income (NOI) in the numerator. Gross yield is useful for ranking markets and neighborhoods at a glance; cap rate and cash-on-cash return are better for underwriting a specific deal once expenses and debt are modeled.
High gross yield can indicate either strong nightly economics or relatively lower property prices (or both). Comparing gross yield across markets is most meaningful when the revenue methodology is consistent — e.g., same definition of active listings and the same trailing period. Always pair gross yield with occupancy and ADR (or RevPAR) so you are not fooled by a market that looks cheap on price but is soft on demand.
Formula
Gross Yield = (Annual Gross Rental Income ÷ Property Value) × 100
Real-world example
Scenario
A market shows $58,000 estimated annual STR income per typical listing and a $420,000 median home value.
Calculation
Gross Yield = ($58,000 ÷ $420,000) × 100 = 13.8%.
Result
That 13.8% is a strong gross yield signal for initial screening. Next step: build NOI and debt service to move from gross yield thinking to cap rate and cash-on-cash for your actual purchase and loan.
Why it matters for STR investors
Gross yield is one of the fastest ways investors scan dozens of markets. It is not a substitute for a full pro forma, but it surfaces where income is high relative to asset prices — the same intuition that makes cap rate popular, one step earlier in the funnel.
Key points
- Numerator is gross rental income — not NOI (unlike cap rate)
- Denominator is property value or purchase price — be consistent when comparing
- Useful for ranking markets; pair with occupancy, ADR, or RevPAR for context
- Does not reflect expenses, taxes, or mortgage — always model those separately
- A high gross yield with weak occupancy may mean prices lag, not that every listing wins
Related terms
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