"This flat gives 3% rent" is where most property conversations start, and where many of them go wrong. A rental yield is a starting number. It is not what you earn. What you earn depends on the costs between the rent and your pocket, on whether you borrow, on how long you hold, on what the property sells for, and on what a safe bond would have paid you instead.
This post takes two invented properties, one in Mumbai and one in Dubai, and runs them through the Holdengard Property Lab step by step. You can repeat every number yourself. The properties are made up for arithmetic, they are not listings, and nothing here is advice or a forecast. Holdengard is an information site. It is not a broker or adviser, so check your own case with a qualified professional.
Try it with your own numbers
Open the Property Lab
Put your own price, rent and costs next to the examples below. It runs in your browser and sends nothing to a server.
Open the Property LabThe ladder: from rent to return
The Property Lab climbs these rungs in order. Each one answers a different question.
- Gross yield: a year of rent divided by the price. How big is the rent?
- Net yield: the rent you keep after empty months, running costs and property tax, divided by the price. How much is real?
- Spread over the bond: net yield minus the local ten-year government bond yield. Does the property beat the safe alternative?
- Year-1 cash flow: rent after costs, less any loan instalment, per month. Does it pay for itself, or do you top it up?
- Cash-on-cash return: that cash flow over the cash you put in, including buying costs. What do you earn on your own money in year one?
- Annualised return (IRR): the yearly return on your cash over the holding period, with rent and costs growing, sold at the end after selling costs and an "easy to sell" haircut. What if it all goes to plan?
- What would flip it: how far one assumption must move before the verdict changes. How fragile is the answer?
Try it with your own numbers
Want a quicker version first? Open the Rental yield and ROI calculator
One screen: yield, cash-on-cash, a 10-year return and bear, base and bull cases. Use the Property Lab afterwards to compare properties in depth.
Want a quicker version first? Open the Rental yield and ROI calculatorExample 1: a Mumbai flat, with and without a loan
The invented property: price ₹1,00,00,000 (₹1 crore), rent ₹25,000 a month. These are the Property Lab inputs, using its India starting values, which the tool flags as to be verified until you put in your own:
| Input | Value used |
|---|---|
| Time with no tenant | 8% of the year |
| Running costs | 0.6% of price a year |
| Property tax | 0.2% of price a year |
| Cost to buy (duty, registration, fees) | 7% of price |
| Local 10-year government bond yield | 6.5% (a starting value, enter today's figure) |
| How easily could you sell? | Average (1.5% haircut), plus 1% selling costs |
| Rent growth / price growth | 3% / 4% a year |
| Hold for | 10 years |
Rung by rung, buying with cash
- Gross yield: ₹3,00,000 a year on ₹1 crore is 3.00%.
- Net yield: from the ₹3,00,000, take off 8% vacancy (₹24,000), running costs (₹60,000) and property tax (₹20,000). You keep ₹1,96,000, which is 1.96% of the price.
- Spread over the bond: 1.96% minus 6.5% is −4.54 points. The rent alone is far below a safe bond.
- Cash you put in: the price plus 7% buying costs, ₹1,07,00,000.
- Year-1 cash flow: ₹1,96,000 a year, about ₹16,333 a month. Cash-on-cash: 1.83%.
- Annualised return over 10 years: 4.83%, which relies on the 4% a year price growth. It is still below the 6.5% bond in this example, and the Lab's verdict reads: "Even with the growth you assumed, this does not beat a safe bond."
Now add a home loan
Same flat, but with 30% down and a ₹70 lakh loan at 9% for 20 years (the Lab's starting loan rate for India, which is a guess, not a quote):
- EMI: about ₹62,981 a month.
- Cash you put in: ₹30 lakh down plus ₹7 lakh buying costs, ₹37,00,000.
- Year-1 cash flow: the rent after costs is about ₹16,333 a month, so you top up roughly ₹46,647 every month. Cash-on-cash: −15.13%.
- Annualised return over 10 years: 0.64%.
The loan did not make the rent bigger. It made the cash you put in smaller and the interest a big cost, so the return got worse here. Borrowing helps only when the property's return beats the cost of the loan, and in this example it does not.
The three scenarios
The Lab's bear, base and bull scenarios shift price growth, rent growth, vacancy and the loan rate together. For the same flat:
| Annualised return, 10 years | Bear | Base | Bull |
|---|---|---|---|
| Cash purchase | 1.83% | 4.83% | 7.73% |
| With the loan | −9.74% | 0.64% | 7.61% |
Read the spread between bear and bull, not just the base. With a loan, the bad case is far worse than the good case is good.
What would flip the verdict?
The Lab's "What would flip the verdict?" table finds the point where the annualised return would just equal the 6.5% bond. For this flat:
| Assumption | You entered | Break-even point (cash) | Break-even point (loan) |
|---|---|---|---|
| Price growth per year | 4% | about 5.9% | about 7.1% |
| Monthly rent | ₹25,000 | about ₹41,000 | about ₹53,000 |
| Purchase price | ₹1,00,00,000 | about ₹60.7 lakh | about ₹47.0 lakh |
None of these is a prediction. They show how far the assumptions would have to move for the property to beat the bond. If the needed price growth looks unreasonable to you, the property is leaning on hope.
Example 2: a Dubai apartment, a high rent yield that is not what it looks like
The invented property: price AED 1,500,000, rent AED 7,500 a month. Dubai starting values in the Lab: 6% of the year empty, running costs 1.2% of price (a stand-in for service charges and upkeep), no property tax, 6% to buy, a 4.5% bond starting value, 1% selling costs and an average-ease haircut. Price growth 4%, rent growth 3%, 10 years.
Buying with cash
- Gross yield 6.00%. Net yield 4.44%. The spread over the 4.5% bond is −0.06 points: almost level.
- Cash you put in: AED 1,590,000. Year-1 cash flow about AED 5,550 a month. Cash-on-cash 4.19%.
- Annualised return over 10 years: 7.25% (bear 4.20%, bull 10.09%).
- The Lab's verdict: "The rent does not beat the bond. This only works if the price growth you assumed actually happens." Price growth could fall to about 0.35% a year before the return dropped to the bond's level.
With a loan (30% down, AED 1,050,000 at 5% for 20 years, EMI about AED 6,930 a month)
- Cash you put in: AED 540,000. Year-1 cash flow about −AED 1,380 a month. Cash-on-cash −3.07%.
- Annualised return: 9.72%, but bear is 1.35% and bull 15.60%.
The loan lifted the base return here because, with price growth included, the property's total return beat the 5% cost of the loan. It also widened the range and turned monthly cash flow negative. That is what leverage does: it magnifies the good and the bad.
What the two examples show
- A bigger gross yield is not a better investment. The Dubai flat's 6% fell to 4.44% after costs, and the Mumbai flat's 3% fell to 1.96%.
- Always compare against the safe alternative. Mumbai's rent was 4.5 points under the bond. Dubai's was about level. Neither "wins" on rent alone, so each leans on price growth.
- A loan changes the shape of the outcome, not just the size. Look at the monthly top-up and the bear case before you look at the base case.
- The answer is only as good as its weakest assumption. The break-even table shows which one to check twice.
Your own check: a 10-minute routine
- Open the Property Lab and pick the market. Enter the price and monthly rent you have been quoted, from documents, not from a brochure's "expected" rent.
- Replace every to be verified value with your own: vacancy, running costs and service charges, property tax and the cost to buy. For India and Dubai buying costs, use the NRI cost calculator so you do not guess.
- Enter today's ten-year government bond yield from the central bank's or treasury's own published figure.
- Turn the loan on only if you are really borrowing, and enter the quoted rate, not the Lab's starting guess.
- Set growth honestly. Try price growth at 0% and 2% as well as your hopeful figure.
- Switch between Bear, Base and Bull. If the bear case hurts, size the deal so you can live with it.
- Open "What would flip the verdict?" and write down the widest assumption. Check that one against evidence.
- Save the share link so you or your adviser can reopen the numbers. The numbers sit in the link after the # sign and are not sent to a server, so anyone you give the link to can read them.
Try it with your own numbers
Run your numbers in the Property Lab
Compare two to four properties side by side, in seven markets, and see what would change the answer.
Run your numbers in the Property LabExtra points for NRIs and overseas buyers
- Compare percentages, not currencies. The Lab shows each property in its own currency. Exchange-rate moves and the cost of sending money are extra risks it does not model for you.
- Rental income and sale proceeds may be taxed, in India and in your country of residence. The Lab does not calculate your tax. Ask a qualified chartered accountant before you buy.
- Check the legal side before the maths. Our guide to buying from abroad and the NRI page cover title, payments and paperwork. The RERA checklist covers the basics for under-construction projects in India.
- Do not rely on a rent number you cannot verify. If the rent is "guaranteed", ask who guarantees it, for how long and what backs it.
Related reading: gross yield, net yield and the bond test for the formulas, and carpet area vs super area for what the price covers.
Frequently asked questions
What is a good rental yield?
There is no single good number, because the safe alternative differs by country and by time. Compare the net yield with the local ten-year government bond yield, then ask what price growth you would need on top. The Property Lab shows that gap as the spread, and the break-even table shows the growth you would be relying on.
Why is my net yield so much lower than the gross yield?
Because empty months, running costs, service charges and property tax come out of the rent before you keep it. In the Mumbai example, 3.00% gross became 1.96% net. In the Dubai example, 6.00% became 4.44%.
Does taking a loan raise my return?
Only if the property's return is higher than the cost of the loan, and it also widens the range of outcomes. In the Mumbai example the loan pulled the 10-year return down from 4.83% to 0.64%. In the Dubai example it raised it from 7.25% to 9.72% while turning monthly cash flow negative and making the bear case much weaker.
Are these numbers real, and can I rely on them?
No. The two properties are invented. The Property Lab's starting values (bond yields, buying costs, running costs, loan rates) are placeholders that the tool itself marks as to be verified. Replace them with your own checked figures. The result is a decision aid, not a forecast, and not a promise of any return.
Does the Property Lab send my numbers anywhere?
No. It runs in your browser, and the share link keeps your inputs after the # sign, which browsers do not send to servers.
How these numbers were produced, checked on 27 October 2026: every figure above was calculated with the Property Lab's own calculation code using the inputs listed in each table, with the Lab's bear, base and bull scenarios and the 1.5% average-ease haircut. Percentages are rounded to two decimals and money to the nearest rupee or dirham, and break-even points are rounded in the tables. The inputs are the Lab's starting values and were not verified against current market data. Replace them with your own checked figures. This is general information, not investment, tax or legal advice, and no return is promised.
