Gross versus net yield: the gap is where deals live or die
Gross yield divides the full annual rent by the purchase price. Every broker quotes it because it is easy to calculate. Net yield backs out vacancy and recurring ownership costs — society charges, property tax, sinking fund contributions — before dividing by price. That is the figure closest to what actually lands in your account before loan repayments begin. When gross looks healthy but net collapses, the deal is almost always underwriting zero vacancy or ignoring municipal outgoings.
The vacancy factor most spreadsheets skip
One empty month is not a rounding error. Spread over a twelve-month year, it cuts gross rent by about 8.3% before you spend a rupee on upkeep. Budget at least one turnover month in metros with active tenant churn, and two if the unit is an older building or on a secondary lane. The calculator deducts vacancy as lost rent, so the impact on both gross and net yield is visible the moment you move the slider.
What 2% versus 4% gross actually means on the same ticket size
On a ₹1 Cr asset, each percentage point of gross yield translates to roughly ₹1 Lakh of annual rent before costs. The spread between 2% and 4% gross is ₹2 Lakh a year on that price. Held for a decade, that gap compounds to twenty lakh rupees of rent you either collected or left on the table, entirely independent of capital appreciation. Use gross to scan listings quickly; use net to compare what the asset earns after it supports itself.
Price-to-rent ratio: the long view on what you are paying
Divide the purchase price by the annual rent to get the price-to-rent ratio. A ratio in the low teens usually signals higher yield and faster gross payback of the purchase price. Ratios in the twenties and thirties are common in premium micro-markets, where buyers are paying for scarcity and future liquidity rather than current income. There is no universal threshold. Pair the ratio with building quality, title depth, and your own holding horizon before drawing a conclusion.
Leverage and what cash-on-cash really measures
Yield on price tells you how the building performs in isolation. Cash-on-cash tells you how your equity performs after you account for stamp duty, brokerage, and renovation in the total cheque you wrote. Once a home loan enters the picture, subtract the monthly EMI from net rent to see whether the asset pays you every month or whether you are bridging the gap from salary. This calculator keeps financing separate by design so you can sanity-check the asset first, then layer debt in a second pass with the EMI tool.