Why positive rental yield can still mean negative cashflow
Rental yield measures income relative to property value. Cashflow measures the money left after operating costs and loan repayments. A property can earn rent and show positive yield while still needing cash from its owner each month.
Worked example: follow the money
Suppose a $750,000 property receives $650 per week. Gross annual rent is $33,800 and gross yield on purchase price is 4.51%. Two vacant weeks reduce collected rent to $32,500. If annual operating costs total $10,000, net operating income is $22,500. With $36,000 of annual loan repayments, cashflow is negative $13,500 per year, or about $259.62 per week.
Keep operating costs separate from finance
Council rates, insurance, maintenance and management fees reduce net operating income. Loan repayments are deducted afterwards to calculate cashflow. That separation lets two buyers compare the same property even if their deposits and loans differ.
Principal is a cash outflow that reduces debt
Principal-and-interest repayments include both interest and repayment of the loan balance. The full amount leaves your bank account, so the calculator deducts both from cashflow. Principal also reduces debt; it is shown separately from interest in the results.
Use the break-even figures with their assumptions
Break-even rent accounts for expenses that increase with rent, including management and letting fees. The results depend on the vacancy, fee and finance assumptions entered. These figures are before personal income tax and do not estimate negative-gearing benefits.
Try the residential calculator or commercial calculator. Read the methodology and limitations before using the results.