What is the difference between gross and net rental yield?
Gross yield is annual rent divided by property value. Net yield subtracts ownership and rental costs first. For decisions, net yield is the better number because vacancy, repairs, insurance, loan interest and maintenance can change the result materially.
Gross yield is useful for quick screening. Net yield is useful for deciding whether the property is worth keeping, furnishing, refinancing or selling.
The current verified benchmark says: Malaysia's gross residential rental yield averaged about 5.3% nationally in early 2026 (Kuala Lumpur ~4.9%, Johor Bahru ~5.3%, George Town ~3.7%), per Global Property Guide using PropertyGuru listing data - NAPIC does not publish a national rental-yield figure. For comparison, the EPF dividend for 2025 was 6.15%, so a typical gross yield sits below EPF before costs, and net yield (after maintenance, vacancy and repairs) is materially lower.
Gross yield vs net yield table
If you only need a market snapshot, use gross yield. If money is actually at risk, use net or true yield.
| Measure | Simple formula | Best use | Main weakness |
|---|---|---|---|
| Gross yield | Annual rent / property value | Fast comparison across areas | Ignores costs and vacancy |
| Net yield | Annual rent minus costs / property value | Realistic landlord performance | Needs clean expense records |
| True yield | Rent adjusted for vacancy minus costs / total money invested | Renovated or furnished units | Needs full capital-cost tracking |
| After-tax yield | Net return after tax effect / investment value | Personal portfolio decision | Depends on individual tax facts |
Use how to calculate rental yield Malaysia for the formula detail and good rental yield Malaysia for the benchmark framing.
Which costs belong in net yield?
Net yield should include real operating costs. Some costs may be tax deductible, but all of them still affect cash return.
For ordinary residential letting taxed under Section 4(d), LHDN allows a deduction for direct expenses wholly and exclusively incurred in producing the rental income: assessment and quit rent; interest on the loan taken to buy the property; fire insurance premium; rent-collection and rent-enforcement costs; the cost of renewing a tenancy or changing tenant (including agent commission for a renewal/subsequent tenant); and repairs to keep the property in its existing state.
Those tax items are a good starting list for net-yield tracking, but yield and tax are not identical. For example, a repair can be deductible and still reduce your cash return. A non-deductible first-letting cost can still be a real cost in your investment model.
What costs should not be hidden inside net yield?
Do not disguise first-letting or capital setup costs as ordinary recurring deductions. Track them separately so the yield picture stays honest.
Costs of getting the FIRST tenant are initial expenses and are NOT deductible against rental income, because they create the income source rather than produce income from it. LHDN names these specifically: advertising cost, legal cost to prepare the first rental agreement, stamp duty, and agent commission — all for the first letting. This applies whether the rental is taxed under Section 4(a) or 4(d).
For a renovated unit, read true yield including renovation and vacancy. The denominator matters: renovation and furnishing may improve rent, but they also increase the money invested.
FAQ
Which is better, gross yield or net yield?
Net yield is better for actual decisions. Gross yield is only a first filter.
Is gross yield enough to compare two condos?
Only for rough screening. Two condos with the same gross yield can have very different repair costs, vacancy risk and maintenance charges.
Should loan interest be included in net yield?
Yes, if you want the property cash return after financing cost. Loan interest is also covered by the approved Section 4(d) deductible-expense anchor.
Does tax relief improve net yield?
There is no special landlord tax relief. Deductions reduce rental income for tax, but they do not erase the cash cost.