What is Gross Rental Yield for Short-Term Rentals?
Gross rental yield is the simplest way to compare STR revenue potential relative to property cost. Learn how to calculate it and what it tells you about an investment.
When comparing multiple short-term rental opportunities quickly — before diving into full underwriting — gross rental yield is one of the fastest screening tools available.
What Is Gross Rental Yield?
Gross rental yield is the ratio of a property's annual gross rental income to its purchase price or current market value, expressed as a percentage. Unlike cap rate, it does not subtract operating expenses — making it simpler but less precise.
Gross Rental Yield = (Annual Gross Rental Income ÷ Property Value) × 100
Gross Rental Yield Example
You're evaluating a $450,000 vacation rental that generates $72,000/year in gross STR income.
Gross Rental Yield = $72,000 ÷ $450,000 × 100 = 16%
A 16% gross rental yield is strong. However, gross yield tells you nothing about actual profit — a property with high gross yield but equally high operating costs may underperform one with lower gross yield and a lean cost structure.
What Is a Good Gross Rental Yield for an STR?
- Under 8%: Low — proceed with caution; verify market and pricing assumptions
- 8–12%: Moderate — common in high-cost coastal markets; workable with lean operations
- 12–18%: Good — target range for most STR investors
- 18–25%: Excellent — high-demand markets or very favorable purchase prices
- 25%+: Exceptional — validate revenue projections carefully
Gross Yield vs. Net Yield vs. Cap Rate
- Gross Rental Yield: Annual gross income ÷ property value. Fast screening; ignores all expenses
- Net Rental Yield: (Gross income − operating expenses) ÷ property value. More accurate; accounts for costs
- Cap Rate: NOI ÷ property value. Institutional standard using standardized NOI definition
Why STR Gross Yields Beat Long-Term Rentals
A property generating $30,000/year as a long-term rental (10% gross yield on $300,000) might generate $60,000–75,000/year as a well-managed STR (20–25% gross yield). This revenue premium is the fundamental investment thesis for STR ownership.
Track your real STR yield across every property — start free with MagicBnB.
About MagicBnB
MagicBnB is the portfolio intelligence platform for short-term rental operators. Connect your Hospitable or Hostfully PMS and bank account through Plaid to track true net profit, ADR, occupancy, and all the metrics that matter — per property, not just in aggregate. Milo, your AI Revenue & Profit Manager, answers questions about your portfolio in plain English. Use the Deal Analyzer to underwrite new acquisitions before you commit. Free plan available — 5 deal analyses included. Start at magicbnb.io.
