How to Calculate Rental Yield, With a Real Bay Area Example
The rental yield formula, then every line of it filled in for a real Oakland purchase — gross yield, net yield, and cash-on-cash once a mortgage is involved.
On this page
There are three yield numbers, they answer three different questions, and most arguments about rental returns are two people quoting different ones at each other. Here they are in order, each worked on the same property.
The three formulas
Gross yield = annual rent ÷ purchase price.
Net yield (also "unlevered yield" or, with a small adjustment, the cap rate) = (annual rent − annual operating costs) ÷ purchase price.
Cash-on-cash return = (annual rent − operating costs − mortgage interest and principal) ÷ cash actually put in.
Gross yield compares markets. Net yield compares properties. Cash-on-cash tells you what your own money did. A property can look good on one and poor on another, and in the Bay Area it usually does.
The worked example
Oakland, because it is the highest-yielding of the Bay Area's large cities and because the figures are published. From Zillow's September 2026 data: mid-tier Oakland home value $710,647, Zillow Observed Rent Index $2,758 a month.
Take those as the purchase price and the achievable rent. Both assumptions get tested at the bottom of this page.
Step 1 — Gross yield
Annual rent is $2,758 × 12 = $33,096.
Gross yield = $33,096 ÷ $710,647 = 4.66%.
That is the number almost every listing, forum post and brokerage brochure means by "yield". It is also the last point in this calculation at which the answer is flattering.
Step 2 — The costs that are on the bill
| Line | Amount / year | How it was arrived at | Evidence |
|---|---|---|---|
| Property tax | $7,817 | 1.1% of the $710,647 purchase price | assumed rate, measured basis |
| Insurance | $2,200 | landlord policy, Bay Area single-family | estimated |
| Vacancy | $1,655 | 5% of annual rent | assumed |
| Maintenance | $3,310 | 10% of annual rent | assumed |
| Property management | $2,648 | 8% of gross rent | assumed |
| Total | $17,630 |
Two of those lines need their reasoning stated rather than hidden.
Property tax starts from the purchase price. California resets a property's assessed value to what the buyer paid, under Proposition 13, and the 1% rate in the state constitution is a floor rather than the whole bill — voter-approved debt, parcel taxes and assessments sit on top. 1.1% is a reasonable Bay Area working figure and a real bill should be checked against the county's own tax rate for the parcel. Full treatment on California property tax on a rental.
Vacancy at 5% is an assumption, not a measurement, and deliberately so. The Census Bureau's own rental vacancy rate for the San Francisco-Oakland-Fremont metro reads 4.6% for Q3 2026 — with a margin of error of 1.9 points. A figure whose confidence interval spans 2.7% to 6.5% cannot carry an underwriting decision. See vacancy and rental yield.
Step 3 — Net yield
Net operating income = $33,096 − $17,630 = $15,466.
Net yield = $15,466 ÷ $710,647 = 2.18%.
The gross was 4.66%. Costs took slightly more than half of it. That ratio — roughly half of gross disappearing before debt — is the single most useful rule of thumb on this site, and it holds across most of the Bay Area for a property without an HOA. Add an HOA and it goes well past half.
Step 4 — Cash-on-cash, once there is a mortgage
Say 25% down on $710,647: $177,662 of equity, a $532,985 loan. At 7.0% over 30 years the payment is $3,546 a month, $42,552 a year.
Cash in: $177,662 down plus, say, 2% closing costs ($14,213) = $191,875.
Annual cash flow = $15,466 net operating income − $42,552 debt service = −$27,086.
Cash-on-cash = −$27,086 ÷ $191,875 = −14.1%.
Where the two inputs could be wrong
The whole calculation rests on a price and a rent, so both deserve scrutiny.
The price. $710,647 is Zillow's mid-tier value — the 33rd to 67th percentile of Oakland homes, single-family and condo, seasonally adjusted. It is not an asking price and not a transaction price. A specific purchase will differ and the arithmetic should be redone with the real number.
The rent. $2,758 is the Zillow Observed Rent Index, which tracks asking rents on new listings across single-family, condo and multifamily. Two consequences. It is higher than what sitting tenants pay, which matters a great deal in a city with rent stabilisation like Oakland. And because it includes apartments while the value index does not, the two are not quite the same basket — the error that why published rental yields are wrong is about.
The short version
- Gross yield is rent ÷ price and is the number everyone quotes.
- Net yield subtracts the bill. In the Bay Area it takes about half of gross.
- Cash-on-cash subtracts the mortgage. At current rates it is negative almost everywhere in this region.
- Property tax follows your purchase price, not the seller's assessment.
- A vacancy rate from a survey is not a vacancy assumption for one property.
City-by-city figures are on Bay Area rental yield by city.