Rental yield represents the annual rental income of a property as a percentage of its purchase price, offering a measure of potential return on investment. It’s a key consideration for investors, and understanding it can also inform selling decisions, particularly if your property has strong rental history.
Currently in Melbourne, calculating rental yield involves two main methods: gross yield and net yield. Gross yield is calculated by annual rental income divided by the property’s purchase price, expressed as a percentage. As of December 2025, with Melbourne’s median dwelling value at $823,495, a property renting for $500 per week (approximately $26,000 annually) would have a gross yield of around 3.16%. Net yield is more comprehensive, factoring in expenses like property management fees (typically 7-10% of rent), council rates, and insurance. In the Eastern Suburbs, where properties often attract premium rents, net yields generally fall between 2.5% and 4%, depending on the property’s condition and ongoing costs. Sellers should be aware that buyers often scrutinise rental history and potential yield when evaluating a property, particularly in areas like Balwyn and Doncaster where investment demand is strong. Fletchers’ comprehensive property appraisals consider these factors, providing a realistic assessment of market value based on both sale and rental potential. In 2026, we anticipate continued buyer focus on properties offering solid investment returns.
Understanding rental yield provides valuable insight into a property’s investment appeal, influencing both buyer interest and ultimately, sale price.