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How to Calculate Rental Yield on an Investment Property – Complete Guide with Gush Dan Examples (2026)

Rental yield is the primary metric that determines whether a real estate investment is profitable. It expresses the annual income from a property as a percentage of its purchase price. In Gush Dan and the Kiryat Ono area, where apartment prices range from NIS 2 million to NIS 5 million, the difference between gross and net yield can represent tens of thousands of shekels per year.

5 דקות קריאה

13 במרץ 2026

בקצרה

In this guide, we explain three types of yield – gross, net, and Cash on Cash return – with detailed formulas and real calculation examples from Kiryat Ono, Givataim, Or Yehuda, and Ganei Tikva. We also cover how Israel's three rental tax tracks (2026) directly affect your bottom line.

עובדות מפתח

Average gross yield in Gush Dan: 2.5%–3.5% per year (2025–2026)
Average monthly rent in Israel Q4 2024: NIS 4,817 – up approximately 5% year-over-year
Tax-exempt rental income ceiling 2026: NIS 5,654 per month
Prime interest rate as of January 2026: 5.5% (after Bank of Israel 0.25% cut)
Investment property mortgage cap: maximum 50% LTV (Bank of Israel regulations)
Recognized depreciation rate for tax purposes on residential property: 2% per year on building value (excluding land)

Gross Yield – The Basic Formula and Why It Is Not Enough

Gross yield is the starting point of any feasibility check. The formula is straightforward: divide annual rent by the purchase price and multiply by 100. For example, a 3-room apartment in Kiryat Ono purchased for NIS 2,500,000 and rented at NIS 5,000/month yields 2.4%. A similar apartment in Or Yehuda at NIS 1,970,000 renting at NIS 4,658/month yields 2.84%.

The problem with gross yield is that it ignores all expenses: municipal taxes during vacancy, building maintenance fees, routine upkeep, insurance, legal fees, and agent commissions. In practice, these reduce net income by 15%–25% compared to gross. A gross yield of 2.7% can therefore translate into a net yield of only 2.0%–2.2%.

Gross yield formula: (Monthly rent × 12 ÷ Purchase price) × 100
Kiryat Ono – 3 rooms: ~NIS 2.5M, rent ~NIS 5,000 → gross yield ~2.4%
Givataim: average gross yield ~2.77%, average rent ~NIS 6,220 (2025)
Or Yehuda: gross yield ~2.85%, average 3-room price ~NIS 1.97M
Ganei Tikva: price per sqm NIS 32,000–35,000; gross yield ~2.6%–2.8%

Net Yield – What You Actually Keep After Expenses

Net yield calculates NOI (Net Operating Income) after all running expenses, divided by total purchase cost. Formula: ((Annual income − Annual expenses) ÷ Total purchase cost) × 100. Total purchase cost must include purchase price plus purchase tax, lawyer fees, and pre-tenancy renovations.

Numerical example: A 4-room apartment in Kiryat Ono at NIS 3,000,000. All-in cost: NIS 3,180,000. Rent: NIS 6,200/month → NIS 74,400/year. Annual expenses: NIS 10,900. NOI: NIS 63,500. Net yield: 2.0%.

Net yield formula: ((Annual rent − Annual expenses) ÷ Total cost) × 100
Typical annual expenses: building fees, property insurance, maintenance, vacancy, leasing agent fee
Average annual expenses in Gush Dan: NIS 8,000–15,000 depending on property age
Older buildings (30+ years): expect higher maintenance – deduct 20%–25% from gross yield
Total purchase cost must include: price + purchase tax (usually 8% for 2nd property) + lawyer 0.5%–1% + renovation

Cash on Cash Return – The Right Metric When Using a Mortgage

When financing part of the purchase with a mortgage, calculate return on equity alone. Formula: ((Annual income − Expenses − Annual mortgage payments) ÷ Equity invested) × 100.

A reality check for Gush Dan 2026: Bank of Israel caps investment property financing at 50% LTV. On NIS 2,500,000, the maximum mortgage is NIS 1,250,000. At prime 5.5% over 20 years, the monthly payment is approximately NIS 8,500 – more than most Kiryat Ono apartments generate in rent (NIS 5,000–6,500). This means negative monthly cash flow.

Cash on Cash formula: ((Annual rent − Expenses − Mortgage payments) ÷ Equity) × 100
Investment property LTV cap in Israel: 50% (Bank of Israel regulations)
Prime rate January 2026: 5.5% (Bank of Israel cut 0.25% in January 2026)
Long-term CPI-linked fixed rate 20+ years: 3.30%–3.57% (as of 2026)
In Gush Dan: most leveraged investors face negative monthly cash flow – plan your finances accordingly

Israeli Rental Tax Tracks – Direct Impact on Net Yield

Choosing the right tax track can add or subtract a full percentage point from your net yield. Three main tracks in 2026: the exemption track (up to NIS 5,654/month), the 10% flat rate on all rental income, and the marginal tax track (minimum 31%).

Example for a landlord collecting NIS 7,000/month: Under exemption track, tax is approximately NIS 1,252/month. Under 10% flat track: NIS 700/month. The 10% track suits most landlords earning NIS 5,654–20,000/month but does not allow expense deductions.

Full exemption: up to NIS 5,654/month (2026) – zero tax, no expense deductions
Partial exemption: NIS 5,654–11,308/month – complex formula, usually less beneficial than 10% track
10% flat track: applies to total rental income, no expense deductions allowed
Marginal tax track: minimum 31% (10% from age 60), allows full expense + depreciation deductions
Depreciation (2%/year on building value): must be subtracted from cost basis at sale – impacts capital gains tax

צ׳קליסט

Checklist: How to Calculate Yield Before Buying an Investment Property

Before signing a purchase contract, run through this checklist – it prevents costly mistakes:

1Step 1 – Gather market data: Check portals (Yad2, Madlan) for realistic rents on comparable units. Do not rely on the seller's estimate.
2Step 2 – Calculate gross yield: Monthly rent × 12 ÷ full purchase price (including fees and taxes). If below 2.5% – think very carefully.
3Step 3 – List annual expenses: Building fees, insurance, average maintenance, vacancy periods, municipal tax during vacancy.
4Step 4 – Calculate net yield: Annual NOI ÷ total purchase cost × 100. This is the real number.
5Step 5 – If using a mortgage: Calculate Cash on Cash. Factor in prime rate 5.5% and 50% LTV cap.
6Step 6 – Choose your tax track: Calculate tax under all three tracks. The 10% flat track is usually most efficient for NIS 5,654–15,000/month.
7Step 7 – Calculate total return: Current yield + expected annual capital appreciation. In Gush Dan, real estate appreciated ~5%–8% annually over the past decade.

שאלות נפוצות

שאלות ותשובות

In Gush Dan, a gross yield of 2.5%–3% is considered reasonable. Or Yehuda and Ganei Tikva offer around 2.8%–3%, while Givataim and Kiryat Ono often come in at 2.4%–2.7%. Capital appreciation is typically the dominant component of total returns here.

With prime at 5.5% and a 50% LTV cap, most Gush Dan investors experience negative monthly cash flow. Make sure you have a safety cushion of at least 6–12 months of mortgage payments before proceeding.

Gross yield calculates rent × 12 ÷ purchase price, before any expenses. Net yield subtracts all annual running costs. The gap is usually 0.4%–0.8% – significant on the large sums typical in Gush Dan.

Depreciation (2%/year on building value) is relevant for landlords on the marginal tax track. Even if you did not actively claim it, the tax authority will still deduct it from your cost basis when calculating capital gains tax at sale.

Or Yehuda offers higher gross yield (~2.85% vs ~2.4% in Kiryat Ono) because its prices are lower relative to rental values. Kiryat Ono has a more stable market with stronger long-term appreciation. Choose based on your goal: current income vs capital growth.

Accurately calculating rental yield on a Gush Dan investment property requires going beyond simple gross yield to understand running expenses, financing costs, and the right tax track for your situation. Cities like Ganei Tikva and Or Yehuda offer relatively higher current yields, while Kiryat Ono and Givataim lead on capital appreciation.

If you are considering purchasing an investment property in Kiryat Ono, Givataim, Ganei Tikva, Or Yehuda, or Yehud, Shmuel at HaNechasim BeGobah HaEinaim (houses-for-sale.co.il) will perform all the feasibility calculations for you and guide you to the right decision. Contact us today for a free initial consultation.

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