By Winfred Quek · CEA R073319H · Published 30 August 2026
Rates and thresholds change. The current figures are kept in one place: the Singapore property rules reference.
Facts verified against the sources linked throughout this guide.
Ask two people what yield a property is getting and you will often get two different answers, both correctly calculated, because they included different things. This guide is a companion to the rental yield calculator, it sets out exactly what the gross and net formulas are, what belongs in a proper net figure, and a full worked example so the mechanics are never a guessing game again.
The gross yield formula
Gross yield is the simple version: annual rent divided by the property's purchase price, expressed as a percentage. A property bought at $1.2 million that rents for $4,000 a month collects $48,000 a year, for a gross yield of 4%. That is the entire calculation, one line, no adjustments.
Gross yield is easy to compute and it is the figure most often quoted by portals, marketing material and agents introducing a unit. It is also, by design, the most flattering number available, because it ignores every single cost of actually holding the property. Treat a gross yield figure as a starting point for comparison, never as an answer to whether a property is a good investment.
The net yield formula, and what belongs in it
Net yield takes the same annual rent, subtracts the real costs of holding the property, and only then divides by purchase price, or by total cash invested if you want a cash on cash view instead. The costs that belong in a proper net yield calculation are:
What to subtract before you divide
- Maintenance or MCST fees. The recurring monthly charge for a condo, or town council service and conservancy charges for an HDB flat.
- Property tax at the non owner occupied rate. A rented out unit cannot claim owner occupier rates, and this is one of the largest and most underestimated deductions, since it scales with the property's Annual Value. Current bands are kept at the rules reference and explained in full in the Annual Value guide.
- A vacancy allowance. The gap between tenancies is rarely zero, and a yield calculation that assumes a unit is rented 12 months a year, every year, is quietly overstating the return.
- Agent commission on new tenancies. Typically expressed as a fraction of a month's rent, amortised over the length of the tenancy it secures.
- Minor repairs and fire insurance. The ordinary running costs of keeping a unit tenantable, not a renovation, just the small recurring items.
Net yield is always lower than gross, sometimes substantially so once property tax and a realistic vacancy allowance are both in the figure. It is the number that tells you what a property genuinely returns from rent, and it is the only version worth comparing across two different units or two different property types. A ranking built on gross yield can flip completely once net yield is applied, because the biggest single deduction, non owner occupied property tax, is progressive and bites harder on higher value properties.
A full worked example
Numbers make the gap concrete. Take a condo bought at $1.2 million, renting for $4,000 a month.
| Line item | Annual amount |
|---|---|
| Gross rental income | $48,000 |
| Less: maintenance or MCST fees | Deduct actual monthly charge, annualised |
| Less: property tax, non owner occupied rate | Deduct amount from your latest IRAS notice, or the current bands at the rules reference |
| Less: vacancy allowance | A realistic gap between tenancies, not zero |
| Less: agent commission, amortised | Typically a fraction of one month's rent per tenancy secured |
| Less: minor repairs and fire insurance | Ordinary annual running cost |
| Net rental income | Gross rent minus all of the above |
Gross yield on this property is $48,000 divided by $1.2 million, exactly 4%. Once every line above is subtracted, net yield lands meaningfully below that, the precise gap depends on the unit's actual Annual Value and maintenance charge, which is why a rule of thumb percentage is never a substitute for running your own property's real figures through the yield calculator. The pattern holds regardless of the specific unit: the higher the Annual Value, the more property tax eats into the net figure, so net yield compresses faster than gross yield as you move up the price ladder.
What stays outside the yield calculation
Two items deliberately sit outside the standard net yield figure, and knowing why avoids a common mixup.
Mortgage interest
Net yield, as conventionally defined, is unlevered, it excludes financing costs entirely, so that a property bought with a large loan and a property bought in full cash can still be compared on the same basis. If you want to know your actual cash return after financing, that is a separate calculation, cash on cash return, which does subtract mortgage interest and divides by the cash you actually put in rather than the full purchase price. Keep the two figures labelled separately, they answer different questions and are not interchangeable.
Income tax on the rental income
Rental income is taxable under Section 10(1)(f) of the Income Tax Act, at your personal marginal tax rate, and this is a genuinely different deduction list from the one used for yield. Mortgage interest, which sits outside the yield calculation, is deductible for tax purposes. Property tax, which sits inside the yield calculation, is also deductible for tax purposes. Renovation costs and the principal portion of your mortgage repayment are not deductible for tax at all. The full deduction rules are covered in the rental income tax guide, worth reading once you have your net yield figure, since the after tax return is the final number that actually lands in your account.
Want the real net yield on a specific unit?
A Property Portfolio Analysis runs gross yield, net yield after tax and MCST fees, and vacancy allowance together, so you are comparing like for like, not a marketing figure.
Book a free 30 minute call WhatsApp WinfredFrequently asked questions
What is the actual formula for gross rental yield?
Gross yield is annual rent divided by purchase price, expressed as a percentage. A property bought at 1.2 million dollars renting for 4,000 dollars a month collects 48,000 dollars a year, for a gross yield of 4 percent. It is a useful quick comparison figure, but it ignores every cost of holding the property, which is why it should never be the number you make a decision on.
What costs should I subtract to get net yield?
Maintenance or MCST fees, property tax at the non owner occupied rate, a vacancy allowance for the gaps between tenants, agent commission on new tenancies, and minor repairs and fire insurance. Subtract the total of these from your annual rent before dividing by purchase price. Net yield is always lower than gross, and it is the number that tells you what the property genuinely returns.
Should mortgage interest be included in the yield calculation?
Not in the standard net yield figure, which is conventionally unlevered so that properties bought with different amounts of financing can still be compared on equal terms. Mortgage interest belongs in a separate cash on cash return calculation, and it also matters for a different reason entirely, it is a deductible expense against your taxable rental income, which is a tax question, not a yield question.
Should I use purchase price or current market value to calculate yield?
Purchase price gives you the yield on your actual cost basis, which is what you compare against your original decision to buy. Current market value gives you the yield on what the property is worth today, which tells you whether it still makes sense to hold versus redeploying that capital elsewhere. Both are legitimate, they answer different questions, so state clearly which one you are using whenever you quote a figure.
Why do two people calculate different yields for the same unit?
Almost always because they are including different costs, or none at all. One person quotes gross yield off the asking rent, another has subtracted property tax, MCST fees and a vacancy allowance to get net yield, and a third has gone further and worked out an after tax, cash on cash figure. None of them are wrong, they are answering different questions. The fix is to always ask what is included before comparing two yield figures.
Sources & References
Winfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H), CEA Registration No. R073319H. The information on this page is general and does not constitute financial, legal or tax advice. Always conduct independent due diligence and consult qualified professionals, including a tax adviser, before making any investment decision.