Rental yield calculator

Gross rental yield = a year's rent ÷ price × 100: a Rs 1.5 crore flat let at Rs 70,000 a month gives Rs 840,000 ÷ Rs 15,000,000 = 5.6%. Net rental yield = (rent collected less running costs and income tax) ÷ (price + buying costs + setup) × 100. With one month empty, 5% of the rent for upkeep, Rs 20,000 of property tax and a salaried owner's income tax, the same flat keeps Rs 592,300 in the first year on Rs 1.59 crore put in: 3.73%.

Judge a yield against what the same money earns elsewhere. With the SBP policy rate at 11.5% (14 September 2026) and 12-month KIBOR at 12.43%, the example flat's first-year net yield of 3.73% earns less than a bank deposit. A rental catches up only if the rent rises every year and the price at least keeps pace with inflation, so the yearly return over the years you hold it, not the first year's yield, is the figure to set beside the bank's rate. Bank profit is taxed too, so compare the two after tax.

It turns on the rent rising and the price holding up. The example flat, Rs 1.5 crore at Rs 70,000 a month, keeps 3.73% of what was put in during its first year. Held 10 years with the rent rising 10% a year and the value 7% a year, then sold, it returns 9.99% a year after income tax, selling costs and capital gains tax. If the price stands still, that drops to 5.21%, and if the rent stands still as well, to 3.17%. Run your own figures and set the answer beside what a deposit pays after tax.

Since tax year 2022 an individual's rent is not taxed on its own. A fifth of the rent is allowed for repairs, the property tax and insurance come off, and the rest is added to your other income and taxed at the ordinary slabs. On a salary of Rs 2 lakh a month, the Rs 596,000 of taxable rent from the example flat adds Rs 119,200 of tax (20%); on a business income of the same size, Rs 178,800 (30%). If the rent takes your salary to 75% or less of your income, all of it is taxed at the higher non-salaried slabs: on a salary of Rs 1 lakh a month the same rent adds Rs 222,800. A tenant that is a company, a school or a clinic, or anyone paying Rs 15 lakh or more a year, deducts tax from the rent under section 155, and that counts towards the tax on your return. Confirm your own case with the FBR or a tax adviser.

On buying: advance tax under section 236K (1.25% for a filer, 10.5% or more for a non-filer, tax year 2027), stamp duty (1% in Punjab and Islamabad, 2% in Sindh), Punjab's 1% TMA fee, registration and the agent's 1%: about 4.5% for a filer, plus any repairs, paint or furnishing. While it is let: the months it stands empty, upkeep, an agent's share if you use one, property tax and insurance, and income tax on the rent. On selling: the agent's 1% and capital gains tax, 15% of the gain for a filer. The 2.75% advance tax on selling counts towards the capital gains tax, so it is not an extra cost.

Cap rate is the rent after running costs, before income tax, over the price alone: 4.74% for the example flat. Net yield also takes off the income tax and divides by everything you put in, buying costs and setup included: 3.73%. Cap rate compares one property with another; net yield tells you what your own money earns.

Divide what you put in by a year's rent after costs and tax. The example flat keeps Rs 592,300 a year on Rs 1.59 crore, which would take 26.8 years at a steady rent. With the rent rising 10% a year, the rent adds up to what was put in after 13.7 years. Neither figure counts the sale.