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Commercial Property Yield Calculator

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Calculate the rental yield and return on investment for commercial property. Compare net yield, cap rate, and cash-on-cash return.

Free to useNo data storedReal-time dataAI insightsUpdated: February 2026

Commercial property can generate significantly higher yields than residential — typically 5-8% net compared to 2-4% for residential. But commercial investing also comes with higher risk: longer vacancy periods, more complex leases, and larger capital requirements. This calculator analyses your commercial property's gross yield, net yield, capitalisation rate, and cash-on-cash return to help you evaluate whether the investment stacks up.

Enter Your Details

Enter Your Details

$

The purchase price of the commercial property

$

Total annual rent from all tenants (before expenses)

$

Council rates, insurance, maintenance, management fees (non-recoverable from tenant)

$

All acquisition costs on top of the purchase price

$

The commercial mortgage amount

%

Commercial loan rates typically range from 6-8%

Lease structure affects your true net income

Real-World Examples

Office Space — Net Lease

A small office suite purchased for $850,000 with $45,000 in purchase costs. Net lease at $65,000/year. Loan: $550,000 at 6.5%.

Gross yield: 7.65%. Net yield (cap rate): $65,000 ÷ $895,000 = 7.26%. Annual loan interest: $35,750. Cash flow (rent - interest): $29,250/year. Cash invested: $345,000. Cash-on-cash return: 8.48% — significantly better than residential.

Retail Shop — Gross Lease

A retail shop for $1.5M. Gross rent: $120,000/year. Landlord-paid outgoings: $25,000/year.

Gross yield: 8%. Net income: $95,000. Net yield: 6.33%. While the gross yield looks attractive, the outgoings reduce it meaningfully. Consider negotiating a net lease on renewal to transfer outgoings to the tenant.

Frequently Asked Questions

Glossary

Cap Rate (Capitalisation Rate)
Net operating income divided by property value. Measures the return independent of financing. Also called net yield in Australian markets.
Cash-on-Cash Return
Annual cash flow (after debt service) divided by the total cash invested (deposit + purchase costs). Measures the return on YOUR money, not the property's total value.
WALE (Weighted Average Lease Expiry)
The average remaining lease term across all tenants, weighted by the rental income each tenant contributes. A longer WALE means more secure income.
Net Lease
A lease structure where the tenant pays some or all of the property outgoings (rates, insurance, maintenance) in addition to base rent. Reduces the landlord's expense risk.

Disclaimer: This calculator provides estimates only and should not be relied upon for financial decisions. Interest rates, fees, and policies change frequently. Always verify information with lenders directly. This is general information, not personal financial advice. Consider seeking advice from a licensed mortgage broker or financial advisor.

Last updated: February 2026

How to Use
  1. Enter the purchase price of the commercial property.
  2. Input the total annual rental income from all tenants.
  3. Add annual expenses that aren't recoverable from tenants.
  4. Include purchase costs (stamp duty, legal, inspections).
  5. If financed, enter the loan amount and interest rate.
  6. Select the lease type — this affects who pays outgoings.
Key Information
  • Gross yield = Annual rent ÷ Purchase price. Net yield = (Annual rent - expenses) ÷ (Purchase price + purchase costs).
  • Cap rate and net yield are used interchangeably in Australia — both measure return net of expenses relative to value.
  • Commercial property typically requires 30-40% deposit (vs 20% for residential).
  • Commercial leases are usually 3-10 years with annual rent reviews (CPI or fixed %).
Pro Tips
  • Focus on NET yield, not gross — a high gross yield with high outgoings might be worse than a lower gross yield on a net lease.
  • Net leases (tenant pays outgoings) are preferred — they transfer expense risk to the tenant and give you more predictable income.
  • Check the WALE (Weighted Average Lease Expiry) — longer WALE = more income certainty. Banks also prefer longer WALE.
  • Location matters less than the tenant's covenant (quality) in commercial. A blue-chip tenant on a 10-year lease is very secure.
Avoid These Mistakes
  • Using gross yield to compare properties — always compare on a net yield / cap rate basis.
  • Not budgeting for vacancies — commercial vacancies can last 6-12 months vs 2-4 weeks for residential.
  • Ignoring tenant quality — a cheap property with a weak tenant is a liability, not an asset.
  • Not accounting for the higher entry costs — stamp duty on commercial is higher, plus due diligence costs more.
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