Gross and net rental yield are both used to estimate the profitability of an investment property, but they account for different expenses. Understanding the distinction is crucial for Melbourne property owners considering their investment performance as of December 2025.
Gross yield is calculated by dividing the annual rental income by the property’s purchase price, expressed as a percentage. It provides a quick, top-level view. However, it doesn’t factor in any ownership costs. Net yield, conversely, considers all expenses associated with owning the property. Currently in Melbourne, these typically include property management fees (around 7-10% of rent), council rates (averaging $1,500 – $3,000 annually in the Eastern Suburbs), insurance ($800 – $2,000 per year), and potential maintenance costs. In 2026, with rising interest rates, factoring in mortgage repayments is particularly important. For example, a property purchased for $823,495 (Melbourne’s median dwelling value as of December 2025) renting for $500 per week has a gross yield of approximately 2.9%. After deducting typical expenses, the net yield might fall to around 2.0-2.3%. Fletchers’ appraisals always consider both figures to provide a realistic investment outlook. We often see investors in areas like Balwyn and Doncaster favour properties with higher net yields, reflecting a focus on long-term profitability.
Essentially, net yield offers a more accurate representation of the actual return on your investment property in the Melbourne market.