Gross rental yield is annual rent / purchase price × 100%. Net rental yield deducts all carrying costs (property tax, maintenance, vacancy, insurance, agent fees, mortgage interest) before dividing by purchase price. Net yield is typically 1.0–1.5 percentage points below gross. A 3.5% gross yield converts to 2.0–2.5% net for most Singapore condos.
Net yield calculation breakdown
| Item | Typical annual cost (S$1M condo) |
|---|---|
| Annual gross rent (3.5%) | S$35,000 |
| Property tax (4% AV) | −S$1,400 |
| Condo maintenance / sinking fund | −S$3,600 (S$300/mo) |
| Insurance + fire premium | −S$500 |
| Agent commission (half-month rent / year) | −S$1,500 |
| Vacancy buffer (1 mo / year) | −S$3,000 |
| Income tax on rental (15% effective) | −S$3,750 |
| Net rent received | S$21,250 |
| Net yield | 2.1% |
Leveraged net yield (cash-on-cash)
If you bought with 75% loan (S$750k at 3% interest = S$22.5k/yr interest), the leveraged cash-on-cash yield is different:
Cash-on-cash yield = (Net rent − mortgage interest) / Cash invested = (S$21,250 − S$22,500) / S$250,000 = −0.5%.
This is normal for early years of high-leverage Singapore property — cash-on-cash improves as rent grows and mortgage principal reduces. Investment framework.
FAQ
Should mortgage interest be deducted from net yield?
It depends on context. For pure property comparison: no. For cash-flow analysis: yes.
What about property depreciation?
Singapore doesn't allow personal property depreciation deduction. Buildings depreciate physically but accounting depreciation is unavailable.
Is rental income taxed at high rates?
Marginal personal income tax rate applies. For most landlords, effective rate is 7-15% after deductions.