Gross Yield, Net Yield: How to Read Both Numbers
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In brief — An "advertised" yield often ignores vacancy, real taxes, management and tax. Once everything is in, a "6%" can become a net 3.8%. The real yield is the number after full expenses and after tax — the only one that matters for deciding.
"6% yield." The number jumps off the listing. But between the yield you are shown and the one you will actually collect, the gap is often brutal. Here is how to stop getting surprised.
What the advertised yield leaves out
A listing's yield is almost always computed at its best: gross rent over price, without the costs that eat the result. It frequently ignores:
- the vacancy allowance (3 to 5% of income);
- the real municipal and school taxes;
- maintenance and reserves for major work;
- management (even your own has a value);
- capped rent growth: in Quebec, rent increases are regulated under the TAL method, not free to track the market — a projection that assumes uncapped increases overstates future returns;
- and above all tax: taxable rental income, then recapture and capital gain at sale.
From gross to net: an example
Illustrative case. A property advertised at "6%" on its gross rent. Subtract 4% vacancy, real taxes, maintenance and management: net operating income falls. The net operating yield drops below 4%. Then factor in tax on rental income and the latent tax at exit: the yield actually available to you falls further. It is not a bad property — it is just the true number.
The metrics to watch (not just one)
A single percentage is not enough. Look at them together:
- Cap rate (net income / price): operating return.
- Cash flow: what is left after the mortgage.
- Cash-on-cash: return on the money actually invested.
- After-tax net return: the only one that reflects what you keep.
It is reading these numbers together — not one isolated yield — that tells a good buy from a trap.
Why it plays out before the offer
A surface yield makes you overpay. Once the property is bought, you do not recover the lost margin. The right reflex: recompute the net yield, expenses and tax included, before you make an offer.
DeedWorth turns the listing into a true number: full expenses, taxation, a 10-year projection and a verdict. You know what the property earns once full expenses and tax are included, not just the gross yield on the listing. Analyze a property with DeedWorth →
FAQ
Why is a listing's yield almost always higher than the real net yield? It is often computed on gross rent without factoring in vacancy, real taxes, maintenance, management and tax. The real net yield is usually much lower.
What is a good cap rate? It depends on the market and risk, but the key is to compute it on real net operating income (after all expenses), not on gross rent.
How do you calculate the real yield? Start from the rents, subtract all expenses (including 3-5% vacancy, taxes, maintenance, management), then account for tax on rental income and tax at resale.
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For information only, not personalized financial advice. Figures are illustrative. Last verified: July 2026.