Yield is a comparison metric
Yield measures rental income relative to the purchase price of a property.
Because yield does not account for financing or most costs:
- It is often used to compare properties at a high level
- It does not indicate profitability or cash flow on its own
- The same yield can produce very different outcomes once costs are included
Yield is best interpreted as a relative measure, not an absolute judgement.
ROI reflects efficiency of invested cash
ROI measures annual profit relative to the total cash invested.
Because ROI includes financing and costs:
- It is sensitive to assumptions
- Small changes can materially affect results
- It varies significantly between cash and mortgaged purchases
ROI is best interpreted in relation to how much cash is committed and how returns are generated.
Why ranges are not universal
Published ranges or benchmarks for yield and ROI often vary because they depend on:
- Property type and location
- Financing structure
- Cost assumptions
- Market conditions at a given time
As a result, values described as "good" in one context may not be comparable in another.
Risk and stability matter
Higher yields or ROIs often come with:
- Greater sensitivity to costs or interest rates
- Less margin for error
- Higher variability in cash flow
Lower yields or ROIs may reflect:
- More stable assumptions
- Lower exposure to changes
- Different trade-offs between cash flow and risk
These trade-offs are not captured by a single number.
Using yield and ROI responsibly
Yield and ROI are most useful when:
- Compared across properties using the same assumptions
- Viewed alongside monthly and annual profit
- Used to understand trade-offs rather than to rank outcomes
They are less useful when treated as targets or standalone indicators.
How the calculator presents these figures
The calculator displays yield and ROI based on the same rental, cost, and financing assumptions. Adjusting inputs shows how sensitive these figures are to changes in assumptions.
This helps place yield and ROI in context rather than treating them as fixed benchmarks.
Summary
There is no single definition of a "good" yield or ROI. Both metrics are context-dependent and should be interpreted alongside cash flow, costs, and assumptions. Understanding how the figures are calculated and what they represent is more important than comparing them to a fixed threshold.