Ask what a good rental yield is and almost everyone lands on 5%, or somewhere between 5 and 6%. Those numbers were set when money cost about half what it costs today. They have been repeated ever since without anyone checking them against a current loan. What counts as good for you depends on what you borrow and what the place costs to run. It shifts whenever rates or your deposit shift.
How to calculate rental yield
Gross rental yield is the annual rent divided by the purchase price. A property renting at $600 a week earns $31,200 a year. On a $650,000 purchase that works out to a gross yield of 4.8%. The formula is weekly rent times 52, divided by the price, times 100. Our rental yield calculator will run it on your own numbers.
Every listing quotes the gross figure, and so does every market report. That makes it handy for comparing markets. It also ignores every cost but the price. On its own, it will not tell you much about whether you can afford to hold the place.
Gross yield vs net yield
Net yield strips the running costs out first.
Property management averages about 7.5% of rent collected nationally, and a fair bit more in some states. Council rates, water, landlord insurance and repairs come on top. So do the weeks the place sits empty between tenants. On a typical property those tend to land around 25% to 30% of gross rent. None of that has touched the interest yet.
So the $600-a-week property grossing 4.8% is netting closer to 3.4% by the time the bills are paid. Strata shifts it again, as our body corporate fees breakdown shows. To work out whether you can carry a property, start from the net figure.
What counts as a good rental yield
The comparison that settles it is your yield against your interest bill. The rules of thumb leave that part out. The RBA’s table F6 puts the average new variable investor loan at the large lenders at 6.3% for July 2026. Borrow 80% of the price at that rate and interest alone costs you 5.04% of the purchase price every year (0.80 x 6.3%).
That leaves you with two different bars:
- Rent covers the interest. You need a 5.04% gross yield at an 80% loan. We modelled this capital by capital in what an investment property costs per week.
- Rent covers interest and the running costs. Take 30% off the rent first, so only 70% of it is left for the loan. The bar climbs to 5.04% divided by 0.7, which is 7.2%.
The higher one is the figure to plan around, since the running costs turn up whether you budgeted for them or not.
The yield your loan actually needs
The bar is set by your deposit more than by the market. Same rate, same costs, different loan size:
| Your loan (LVR) | Yield to cover interest | Yield to cover everything |
|---|---|---|
| 90% | 5.67% | 8.1% |
| 80% | 5.04% | 7.2% |
| 70% | 4.41% | 6.3% |
| 60% | 3.78% | 5.4% |
| 50% | 3.15% | 4.5% |
Assumes a 6.3% interest rate and running costs at 30% of gross rent. The first column is LVR x 6.3%. The second is that figure divided by 0.7.
Drop from an 80% loan to a 60% loan and the bar falls from 7.2% to 5.4% without anything about the property changing. A 4.6% yield that looks poor on a big loan is comfortable on a small one. That is why the question has no single answer, and why a good yield depends on your deposit.
What Australian markets yield now
Against a 7.2% bar, this is where the country sits. These are the gross yields in Cotality’s Home Value Index at 31 August 2026.
The national gross yield is 3.8%, its highest since September 2019, because rents kept climbing while values fell. Even after that run it sits 3.4 percentage points below the bar.
Cotality’s table has 43 market and property-type combinations. It covers every capital and every rest-of-state region, for dwellings, houses and units wherever Cotality reports them. Three clear 7.2%. They are regional Northern Territory houses at 8.0%, regional Western Australia units at 7.9% and Darwin units at 7.4%. Eight get over the lower 5.04% interest-only bar.
Cotality puts it plainly enough. Gross yields across the larger capitals “remain well below the level required to achieve a neutral cash flow position for most investors”. Research director Tim Lawless noted yields “would need to rise substantially before rental income offsets holding costs, particularly while interest rates remain elevated”.
Why the 5% rule of thumb is dated
The 5% figure made sense when investors were borrowing at 3%. Interest then cost 2.4% of the price on an 80% loan. A 5% gross yield covered it twice over, with enough left for the rates notice.
At 6.3% the same 5% yield falls just short of the interest on its own. Nobody retired the rule when rates doubled. So investors buy what they were told was a good yield and find it costs them money every week. On a $650,000 purchase at 80%, a 5% yield leaves a gap of about $193 a week once running costs are in.
The US 1% rule doesn’t fit Australia either. It needs a gross yield of 12%, which no capital city or regional market reaches on Cotality’s figures.
How to lift the yield you can get
Three things move it.
Your deposit. More equity means a lower bar to clear. It is also the one variable in the table above you can change today.
Property type. Units out-yield houses in every capital and in every region Cotality reports units for, at 4.6% against 3.5% nationally. Melbourne units run 5.1% against 3.5% for houses. The gap is real, though units carry strata costs and weaker land content. So the house or unit decision comes down to more than yield.
Market selection. The spread runs from Sydney at 3.3% up to Darwin at 6.3%, a wider swing than anything else on this list. Affordable markets tend to carry the stronger yield and the lower entry price together.
Chasing the highest number on the board is its own mistake. A 9% yield in a single-industry town with thin sale volumes is a different asset to a 5% yield in a growing regional centre. Yield alone won’t tell you which one compounds. That is why the growth and yield question is better answered together.
Picking a yield you can hold
A good rental yield is the one that gets you over your own bar. It leaves enough margin that a vacancy or a rate rise does not force a sale. At an 80% loan on July’s average rate, that bar is 7.2%. Almost nothing in Australia clears it. Many investors are buying a shortfall deliberately and funding it from salary while growth does the work. There is nothing wrong with that as a strategy, provided somebody told you the number before you signed.
Work out your own bar before you start looking at listings.
This is general information only and not financial advice. Speak to a qualified professional before making investment decisions.
If you want to know which markets clear your bar on your deposit, book a free discovery call.
