How do I calculate net rental yield?

Net initial yield (NIY) is the net annual rental income a property produces, expressed as a percentage of its gross purchase price including the buyer's acquisition costs such as stamp duty, legal and agents' fees. It is the standard measure used to value and compare commercial property, and follows the approach set out in the RICS valuation standards.

The formula is: NIY = (net annual rent ÷ gross purchase price including costs) × 100.

NIY differs from residential gross and net yield in two ways. It always works from net income, after non-recoverable costs, and its denominator is the gross price inclusive of purchase costs rather than the price alone. Both effects make NIY lower than a headline gross yield on the same property. To work through a commercial example, see how to work out yield on a commercial property. For residential gross, net and cash-on-cash figures, use the August rental yield calculator.