Rental Yield: What It Is and How It Impacts Your Property Investment

When you buy a property to rent out, rental yield, the percentage return you earn from rent compared to the property’s purchase price. It’s not about how much rent you collect—it’s about how much that rent is worth relative to what you spent. A high rental yield means you’re getting more bang for your buck. A low one? You might be paying too much upfront, even if the rent looks good on paper.

This number connects directly to other key ideas like property investment, rental income, and cap rate. Rental yield is the starting point. Cap rate builds on it by factoring in operating costs—things like maintenance, property taxes, and insurance. If you’re looking at commercial property, you’re probably already comparing cap rates. But for residential rentals, especially in India, rental yield is the first number smart investors check before signing anything.

Here’s the thing: a 10% rental yield in a small city might be better than a 6% yield in Mumbai. Why? Because in Mumbai, the property price is inflated. In smaller towns, lower prices mean higher yields—and often, less competition. You don’t need a luxury apartment to make money. A simple 2BHK in a growing suburb, rented out for ₹15,000 a month, can give you a solid yield if you bought it for ₹20 lakhs. That’s 9% annual return, before appreciation.

And it’s not just about location. The type of property matters too. A 2K apartment (one bedroom, one kitchen) might rent faster and cost less to maintain than a full 2BHK. Investors in cities like Pune or Jaipur are seeing better yields on compact units because demand from young professionals is high and turnover is quick. Meanwhile, villas often have lower yields because they cost more to buy, even if the rent is higher. It’s a trade-off: comfort vs. cash flow.

Don’t get fooled by flashy listings. Some sellers advertise ‘high rental potential’ without showing the math. Always calculate it yourself: annual rent divided by purchase price, times 100. If you paid ₹30 lakhs and rent it for ₹20,000 a month, your annual rent is ₹2.4 lakhs. That’s an 8% yield. Sounds good? Now subtract property taxes, maintenance, and vacancy time. That’s your real return.

What you’ll find below are real examples from people who’ve done this right—and some who didn’t. You’ll see how rental yield plays out in different cities, how it compares to other investment types, and why some properties that look expensive are actually smarter buys. There’s no magic formula. Just clear numbers, honest trade-offs, and what actually works on the ground in India’s rental market.