How to Compute Net Rental Yield
Rental yield is the standard way to judge how hard a property works for its price — but "gross yield," the figure most listings quote, tells only part of the story. Here's how to get from gross to net, and a full worked example for a private condo, including what happens once financing and income tax enter the picture.
Gross Yield vs. Net Rental Yield
Both figures are expressed as a percentage of the property's purchase price, but they answer different questions.
This is the quick, back-of-envelope number — it ignores every running cost of holding the property. Useful for a first comparison across listings, but it overstates what you'll actually keep.
Net yield strips out the costs of actually running the property — property tax, maintenance, and letting costs — to show what the property itself earns you before financing and personal income tax. It's the figure worth comparing across two properties, because unlike a mortgage or a tax bracket, it doesn't depend on how you personally chose to fund the purchase.
What to Deduct, Category by Category
For a privately-owned rental unit, five categories of cost typically come up. Here's how each is treated.
Mortgage Loan
Left out of the net rental yield calculation itself, since it depends on your loan quantum, tenure, and rate — not the property. But the monthly instalment (principal + interest) is a real cash outflow, so we factor it into a separate after-mortgage cash flow figure later on this page. Only the interest portion is tax-deductible; the principal portion is not an expense at all — it's building your equity in the property.
Property Agent Fee
Market norm for a landlord's agent commission is roughly half a month's rent for a 1-year lease, or about one month's rent for a 2-year lease — negotiable, and not fixed by CEA. It's a deductible expense against rental income if you claim actual expenses.
Property Tax (Non-Owner-Occupier Rate)
A rented-out unit is always taxed at the higher non-owner-occupier rate — see the table below. It's computed on the property's Annual Value (AV), IRAS's estimate of achievable annual rent, not on the rent you actually charge.
MCST (Management Corporation) Fee
The monthly maintenance and sinking fund contribution charged by your development's Management Corporation Strata Title — covers upkeep of common property such as lifts, security, and shared facilities. Fully deductible against rental income.
Income Tax on Rental Income
Rental income is taxable, added to your other income and taxed at your personal marginal rate. You can deduct actual expenses (mortgage interest, property tax, MCST, agent fee, repairs) against it — or, if simpler, claim a flat 15% of gross rent as a deemed expense plus your actual mortgage interest on top, without needing to itemise the rest. Whichever gives the lower taxable amount is worth using; IRAS's own rental calculator can compare both for you.
| Portion of Annual Value (Non-Owner-Occupier) | |
|---|---|
| First $30,000 | 12% |
| Next $15,000 | 20% |
| Next $15,000 | 28% |
| Above $60,000 | 36% |
A $1.2M Condo, Rented at $5,000/Month for 2 Years
All figures below are illustrative, using round assumptions and rates current as of August 2026.
| Purchase price | $1,200,000 |
| Rent | $5,000/month |
| Lease term | 2 years |
| Total rent (2 years) | $60,000/year, $120,000 total |
| Loan quantum | $900,000 (75% LTV) |
| Loan tenure | 25 years |
| Interest rate (illustrative) | 1.8% p.a. |
| Annual Value (AV) | $60,000 (assumed = gross annual rent) |
| MCST fee | $350/month ($4,200/year) |
| Agent commission | $5,000 (one month's rent, paid once) |
| Marginal income tax rate (illustrative) | 11.5% |
From Gross Yield to Net Rental Yield
Gross Rental Yield
| Annual rent | $60,000 |
| Purchase price | $1,200,000 |
| Gross yield | 5.00% |
Annual Operating Expenses
| Property tax (recurs every year) | $10,800 |
| MCST fee (recurs every year) | $4,200 |
| Agent fee (one-time, Year 1 only) | $5,000 |
Net Operating Income & Yield
| Gross rent | $60,000 |
| Less: Operating Expenses ($10,800 property tax + $4,200 MCST + $5,000 agent fee) | −$20,000 |
| Net Operating Income | $40,000 |
| Net rental yield | 3.33% |
Net Operating Income & Yield
| Gross rent | $60,000 |
| Less: Operating Expenses ($10,800 property tax + $4,200 MCST — agent fee already paid in Year 1) | −$15,000 |
| Net Operating Income | $45,000 |
| Net rental yield | 3.75% |
Over the full 2 years, total rent of $120,000 less total operating expenses of $35,000 (property tax, MCST, and the one-time agent fee) leaves $85,000 — an average of $42,500 a year, or 3.54% of the $1,200,000 purchase price. This is the number to use when comparing this condo's rental performance against another property.
What Happens Once the Mortgage and Income Tax Are In
Net rental yield tells you how the property performs on its own — but if you're financing the purchase, your actual cash position is a different number entirely. Here's the same example with the mortgage instalment and income tax added in.
$900,000 Loan, 25 Years, 1.8% p.a.
| Year 1 | Year 2 | |
|---|---|---|
| Monthly instalment | $3,727.67 | $3,727.67 |
| — of which interest | $15,963 | $15,441 |
| — of which principal | $28,769 | $29,291 |
| Annual instalment | $44,732 | $44,732 |
Taxable Rental Income (Actual Expenses Method)
| Year 1 | Year 2 | |
|---|---|---|
| Gross rent | $60,000 | $60,000 |
| Less: mortgage interest | −$15,963 | −$15,441 |
| Less: property tax | −$10,800 | −$10,800 |
| Less: MCST fee | −$4,200 | −$4,200 |
| Less: agent fee | −$5,000 | $0 |
| Taxable rental income | $24,037 | $29,559 |
| Income tax at 11.5% (illustrative) | $2,764 | $3,399 |