How to Actually Calculate Rental Yield in Kenya

Ask a landlord what their rental yield is, and most will tell you their rent. Those are not the same number, and the gap between them is where a lot of property decisions quietly go wrong.

Rental yield is a measure of how much a property actually earns relative to what it cost you, expressed as a percentage. It's the number that lets you compare a plot in Kitengela to an apartment in Kilimani on equal footing, something "monthly rent" alone can never do, because a KES 30,000 rent on a property worth 3 million behaves completely differently from the same rent on a property worth 8 million.

The Basic Formula

Gross rental yield is calculated as:

(Annual Rental Income ÷ Property Value) × 100

That's the simple version, and it's useful as a first pass, but it overstates how well a property is actually performing, because it ignores everything you spend to keep that income coming in.

Net Yield Is the Number That Actually Matters

Net rental yield subtracts your operating costs before dividing by the property value:

((Annual Rental Income − Annual Operating Costs) ÷ Property Value) × 100

The costs landlords most commonly forget to include are the ones that don't arrive as a single large, memorable expense:

• Vacancy periods. If a unit sits empty for even three weeks between tenants, that's lost income that should be subtracted from your annual total, not ignored because "it's rented now."
• Routine maintenance. Repainting, plumbing fixes, appliance repairs. These add up over a year even when no single repair feels significant.
• Management costs. Whether that's a management company's fee, a caretaker's salary, or simply the value of your own time if you're managing it yourself.
• Land rates and any association or security fees. Easy to forget because they're often annual rather than monthly.
• Insurance, where you carry it. Often skipped in yield calculations entirely, even though it's a real annual cost.

Landlords who only calculate gross yield tend to overestimate how well their property is performing, sometimes by a significant margin, because these costs are individually small but collectively substantial.

A Worked Hypothetical

To make this concrete, here's a purely illustrative example. Say a one-bedroom unit in a mid-tier Nairobi suburb rents for KES 25,000 a month, and the unit itself (its proportional share of the property's purchase cost) was acquired for KES 3,200,000.

Annual rental income: 25,000 × 12 = KES 300,000

Gross yield: (300,000 ÷ 3,200,000) × 100 = 9.4%

Now suppose, hypothetically, that over the year this unit had three weeks of vacancy between tenants (roughly KES 17,300 in lost rent), KES 18,000 in routine maintenance, KES 12,000 in land rates, and a management cost equivalent to 8% of collected rent (roughly 22,600, since the vacancy reduces what was actually collected).

Total costs: 17,300 + 18,000 + 12,000 + 22,600 ≈ KES 69,900

Net income: 300,000 − 69,900 = KES 230,100

Net yield: (230,100 ÷ 3,200,000) × 100 ≈ 7.2%

The gap between 9.4% and 7.2% in this hypothetical is the gap between how the property looks on a rent roll and how it actually performs. Neither number is "wrong," but only one of them tells you whether this property is actually a good investment relative to another one, or relative to simply holding the money in a fixed deposit or government security.

What Counts as a "Good" Yield in Kenya

This varies significantly by location and property type, and anyone who gives you one universal number to aim for is oversimplifying. Broadly, residential yields in well-established Nairobi suburbs tend to sit lower than in satellite towns and newer developing areas, because property values in established areas have already priced in their desirability, while rents haven't necessarily kept pace. Commercial and student-focused properties, by contrast, often run higher yields than standard residential, partly because they carry different risks and partly because turnover and management intensity are higher.

Rather than chasing a specific percentage you've heard quoted somewhere, the more useful exercise is calculating your own net yield consistently across your own units, so you can see which of your properties are actually working hardest for you, and whether a property you're considering buying compares favorably to what you already own.

Why Landlords Get This Wrong

The most common mistake isn't a math error. It's using a property's current estimated market value instead of what was actually paid for it, especially for a property bought years ago. If land values in the area have tripled since purchase, using today's market value in the yield formula will make an otherwise solid-performing property look mediocre, when in fact the real return on the original investment has been excellent.

Which figure you use, purchase price or current market value, should match the question you're actually asking. "How well is this performing relative to what I paid?" uses purchase price. "Should I sell this and redeploy the capital elsewhere?" uses current market value. Conflating the two leads to decisions that don't actually serve the goal you had in mind.

Making This Easier to Track

The hardest part of calculating net yield honestly isn't the formula, it's having accurate records of every cost across the year in one place, rather than scattered across receipts, memory, and several different M-Pesa statements. Landlords who track payments and expenses in a single system, by unit, tend to arrive at year-end with an actual answer to "what did this property cost me to run" rather than a rough guess.

Want a clearer picture of what each of your units actually earns, net of costs? Start a free 30-day trial at Makeja Homes and see income and expenses tracked by unit, automatically.