What is Rental Yield?
Rental yield is the annual return you earn from a property as a percentage of its purchase price. It is the single most important metric for evaluating an income-generating property investment. Understanding how to calculate and compare rental yields will help you make smarter investment decisions in Kenya's property market.
Gross Yield vs Net Yield
There are two types of rental yield every investor must understand:
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Gross yield — The simplest calculation. Annual rent divided by property purchase price, multiplied by 100.
Example: A property purchased for KSh 9,000,000 generating KSh 900,000 per year in rent = 10% gross yield. -
Net yield — A more accurate measure. Deducts all costs (service charges, management fees, insurance, maintenance, vacancy allowance) from annual rent before dividing by purchase price.
Example: The same property with KSh 150,000 in annual costs has KSh 750,000 net income. KSh 750,000 ÷ KSh 9,000,000 = approximately 8.3% net yield.
What is a Good Rental Yield in Kenya?
Yield expectations vary by property type and location:
- Prime commercial offices (Westlands, Upper Hill) — 7%–10% gross yield
- Secondary commercial offices — 5%–8% gross yield
- Prime residential apartments (Kilimani, Lavington) — 4%–6% gross yield
- Residential homes (Karen, Runda) — 3%–5% gross yield
Commercial property consistently outperforms residential on yield, which is why many serious investors prioritise offices and mixed-use assets.
Factors That Affect Rental Yield
- Location — Prime locations command higher rents but also higher purchase prices. The net effect on yield varies.
- Tenant quality — Corporate tenants typically pay on time and sign longer leases, reducing vacancy risk.
- Building grade — Grade A buildings attract premium tenants willing to pay higher rents.
- Vacancy rate — Even one month of vacancy per year reduces your effective yield by approximately 8%.
- Rent escalation clauses — Leases with annual rent reviews protect your yield against inflation.
Yield vs Capital Growth: Striking the Balance
High-yield properties don't always deliver the strongest capital growth, and vice versa. The best investment strategy balances both — seeking properties in locations with strong rental demand today and solid capital appreciation potential over the medium term.
Calculate Your Returns with Mandela
Every Mandela property listing includes key investment metrics to help you evaluate returns quickly. Browse investment properties or explore commercial offices with strong yield potential.
Important: Property prices, rental yields, service charges, occupancy and investment performance vary by property and over time. Figures and examples in this guide are for general information only, not a guarantee or a substitute for independent valuation, legal due diligence or professional financial advice. Verify current details before committing.