A flat advertised with “excellent rental returns” needs more than a confident sales claim. The most helpful starting point is a straightforward **rental yield calculation**, followed by a realistic estimate of vacancy and landlord expenses. This approach can compare buy-to-let apartments across Kolkata without assuming that rent, prices or appreciation will rise at a guaranteed rate.
Gross yield: the basic formula
**Gross rental yield (%) = (monthly rent × 12 ÷ purchase cost) × 100.**
Suppose a hypothetical Kolkata flat costs ₹60 lakh and has an expected rent of ₹15,000 per month. Scheduled annual rent would be ₹1,80,000. On the stated ₹60 lakh purchase cost, gross yield is 3%. This is an illustration, **not a current locality rent quote or promised investment return**.
The cost figure needs consistency. Some calculations use only the flat's basic price while others include stamp duty, registration, legal fees, essential furnishing and other closing expenses. A broader all-in investment cost usually gives a more realistic comparison.
Net yield: the measure closer to your actual cash return
Net rental yield deducts the annual expenses paid by the owner and allows for potential vacancies. A simple form is:
**Net yield (%) = (collected annual rent − owner-paid annual expenses) ÷ total acquisition cost × 100.**
Imagine one month without a tenant, so rent collected is ₹1,65,000 rather than ₹1,80,000. If annual owner-paid expenses total ₹30,000 and the all-in acquisition cost is ₹65 lakh, net income is ₹1,35,000 and net yield is approximately **2.08%**. The exact number depends on lease terms and actual bills.
What to include in owner expenses
- Property tax and statutory dues payable by the owner.
- Society charges not contractually recovered from the tenant.
- Repairs, painting and replacement of worn fittings.
- Insurance, administration and property-management fees.
- Brokerage or marketing costs when finding a replacement tenant.
- Vacancy and non-payment allowances.
- Unrecovered costs of furnishing, appliances and periodic refurbishment.
Security deposits are generally refundable liabilities, not rental income. One-time repair allowances should not be quietly excluded just to make a yield look higher.
Gross yield is not cash-on-cash return
If you buy using a mortgage, interest and principal repayments affect your monthly cash flow. However, loan repayments are not the same thing as operating expenses used in standard unleveraged yield calculations. For leveraged investment analysis, compare after-financing cash flows separately. Do not mix a gross yield percentage with an EMI calculation and call them the same metric.
