How do you work out rental yield and running costs on a townhouse?
Gross rental yield is a year's rent divided by the purchase price, shown as a percentage. Net yield first takes the running costs off the rent, so it is always lower. As at October 2026, Cotality puts the national gross yield on dwellings at 3.9%, with houses at 3.6% and units at 4.7%, and it warns that insurance, maintenance, strata fees and interest leave little room for neutral or positive cash flow.
Gross yield = annual rent divided by purchase price. Net yield = (rent collected minus running costs) divided by purchase price. Cotality does not publish a townhouse yield, only figures for houses and units.
Checked October 2026. Rules, rates and prices change, so confirm anything that matters with the source linked below.
Gross yield, and what the published figures say
The formula is annual rent divided by price, multiplied by 100. A townhouse bought for $750,000 that rents for $560 a week brings in $29,120 a year (560 x 52), which is 3.9% of the price.
Cotality's Home Value Index for October 2026 (results to 30 September 2026) reports gross yields for houses and units but not for townhouses. The table shows the two ends of the range for the larger capitals.
| Capital | Houses | Units |
|---|---|---|
| Sydney | 3.0% | 4.4% |
| Melbourne | 3.5% | 5.2% |
| Brisbane | 3.4% | 4.2% |
| Adelaide | 3.5% | 4.5% |
| Perth | 3.9% | 5.2% |
| Canberra | 4.0% | 5.5% |
Cotality does not say where townhouses fall between the two, so a local agent's rent estimate for the actual property is a better starting point than any average.
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See the townhouse developments selling now, with bedrooms, prices and completion dates, city by city.
Net yield: the costs to take off
Net yield is rent actually collected, less the costs of holding the property, divided by the price. These are the usual items, with the ATO's treatment for a rental property in its 2026 rental properties guide:
| Cost | How the ATO treats it |
|---|---|
| Regular body corporate or strata levies (administration and general sinking fund) | Deductible when incurred |
| Special levy for a capital improvement | Not an immediate deduction; may qualify as a capital works deduction later |
| Insurance (building, contents, public liability, loss of rent) | Deductible |
| Council rates | Deductible for periods the property is rented or available for rent |
| Land tax | Deductible in the income year the liability arises; the liability is set by state law |
| Property manager fees and letting costs | Management fees and commissions are deductible; costs of selling are not |
| Repairs and maintenance | Deductible when restoring something to working order; improvements are capital |
Land tax is set by each state and territory, so check the revenue office for the state the townhouse is in (Revenue NSW, for example, publishes the New South Wales rules and exemptions). Strata and body corporate costs for townhouses are covered in the body corporate fees guide and how much strata fees are.
A worked example
The figures below are assumptions chosen to show the arithmetic. They are not market data.
| Item | Amount |
|---|---|
| Purchase price | $750,000 |
| Weekly rent | $560 |
| Rent for a full year (560 x 52) | $29,120 |
| Gross yield (29,120 divided by 750,000) | 3.9% |
| Rent collected after 2 empty weeks (560 x 50) | $28,000 |
| Strata levies | $3,600 |
| Council rates | $1,900 |
| Landlord insurance | $1,300 |
| Management fee at 7% of rent collected (0.07 x 28,000) | $1,960 |
| Maintenance allowance | $1,500 |
| Total costs (3,600 + 1,900 + 1,300 + 1,960 + 1,500) | $10,260 |
| Net income (28,000 minus 10,260) | $17,740 |
| Net yield (17,740 divided by 750,000) | 2.4% |
The costs in this example take about 37% of the rent collected (10,260 divided by 28,000). If the strata levies were $5,400 instead of $3,600, the net income would fall to $15,940, which is a net yield of 2.1%. Management fee rates and levies vary by agent and by scheme, and land tax is left out because it depends on the state and the owner's total land holdings.
What a yield figure leaves out
- Finance costs. Yield is calculated before interest. Cotality names interest rates as one of the holding costs that keep cash flow tight.
- Buying costs. Stamp duty and legal fees add to what is paid but are not in the price used above. The state guides, such as stamp duty on a townhouse, cover how duty is worked out.
- Tax effects. Deductions, depreciation and the 2026 changes to negative gearing and capital gains tax change what the owner keeps after tax. See depreciation on a townhouse.
- Growth or loss in value. Yield measures income only. Cotality reports national dwelling values 5.2% below their March 2026 peak.
What moves the numbers
Vacancy has a direct effect on collected rent. Cotality's national vacancy rate was 2.0% in September 2026, with Adelaide the tightest capital at 1.4% and Hobart the highest at 3.0%. Sydney was 2.3%, and Brisbane and Perth were 2.1%. A longer gap between tenants reduces the year's rent, as the two-week allowance above shows.
Common questions
- What is a good rental yield for a townhouse?
There is no official benchmark. Cotality's October 2026 gross yields run from 3.0% for Sydney houses to 5.5% for Canberra units, and Darwin is higher still. Whether a figure suits an owner depends on the price, the borrowing costs and the tax position, so a broker or tax agent can test it against actual numbers.
- Is gross or net yield the better measure?
They answer different questions. Gross yield is quick for comparing listings. Net yield is closer to what the property earns once levies, insurance, rates, agent fees and vacancy are counted, so it is the figure that matters for cash flow.
- Are strata levies tax deductible?
Regular administration and general sinking fund levies are deductible for a rental property, according to the ATO. A special levy for a particular capital improvement is not an immediate deduction, but it may count towards a capital works deduction once the work is completed. The strata fees tax guide goes further.
- Does the yield change if the townhouse is new?
The formula is the same. What can differ is the tax side: the ATO says most second-hand depreciating assets in an established residential rental cannot be claimed after 1 July 2017, while new assets in a new property generally can. That affects after-tax returns, not the yield formula, and the depreciation guide explains the rules.
Keep reading
- Are townhouses a good investment?
- Townhouse or apartment as an investment: what is different?
- Are strata fees tax deductible, and what about GST?
- What does landlord insurance cover on a townhouse, and what does strata cover?
- How much are strata and body corporate fees?
- What to expect when selling a townhouse
Sources
This is general information, not financial, tax or legal advice. Get advice that suits your situation before you buy.