Gross Yield vs. Net Yield in Japan Real Estate

When looking at property investments, you’ll often see “gross yield” (表面利回り) advertised, but the number can be misleading. The true return is better understood by calculating “net yield” (実質利回り).

1. Gross Yield (表面利回り)

• Formula:

Gross Yield (表面利回り) = Annual Rent Income Purchase Price × 100

• What it shows: A quick snapshot based only on rent and purchase price.

• Limitation: Does not include taxes, management fees, insurance, or vacancies.

• Example:

  • Annual Rent: ¥1,000,000

  • Purchase Price: ¥20,000,000

  • Gross Yield = 5%

2. Net Yield (実質利回り)

• Formula:

Net Yield (実質利回り) = Annual Rent Income − Annual Costs Total Purchase Price × 100

• What it shows: The real return after deducting:

  • Management fees (管理費)

  • Repair reserve fund (修繕積立金)

  • Fixed asset tax (固定資産税)

  • Fire/earthquake insurance (保険料)

  • Rent collection fees (集金代行手数料)

• Example:

  • Annual Rent: ¥1,000,000

  • Costs: ¥200,000

  • Net Yield = 4%

3. Why It Matters for Investors

• Gross yield looks higher but can be unrealistic.

• Net yield shows true profitability, and is what serious investors use to compare properties.

• In Japan, advertised yields are usually gross, so investors must carefully calculate the net.

At Mpathian, we go beyond advertised gross yields — we break down all costs so you see the real net yield upfront, giving you clarity and peace of mind.