After putting your information into the calculator, you’ll see a gross and a net yield amount, which is broken down further to give you an estimated weekly cash flow figure.

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Let’s go through the differences.

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Gross Yield

Gross yields are calculated by taking the rent your property is expected to achieve each week, multiplying it by 52 weeks to get the potential annual rent, and then dividing that figure by the purchase price or value of your property.

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They're easy to calculate (which is why you'll often see them mentioned and reported in the media) but for an individual property investor looking at a particular investment, a gross yield is not very useful.

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Why? Because a property might attract a lot of revenue as a proportion of the purchase price, but it could actually cost you money each week. This would happen if the costs associated with the property, e.g. maintenance, are also very high.

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For example, if you invested in a run-down property in an area where property prices are cheap, it will likely get a high gross yield. But if the hot water cylinder bursts, there are ongoing maintenance issues, or the property is structured on a principal and interest loan, it could well be cash-flow negative.

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Net Yield

With all the above limitations considered, it makes sense to pay attention to the net yield of an individual property.

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It’s what your cash flow would be, after all your operating expenses, but before your mortgage expenses.

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Operating expenses include rates, insurance, property management and maintenance. But it excludes the financing costs of your mortgage.

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The net yield figure is much more useful when comparing properties because while your finance costs will be very similar, your operating expenses can vary widely between properties.

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The apartments are expected to earn the same amount in rent, but one has a higher body corporate than the other.